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Alibaba files documents for US stock offering

Source: AFP | May 7, 2014, Wednesday | Online Edition

ALIBABA -- often described as a Chinese version of Amazon or eBay -- filed documents Tuesday for its US stock listing, widely expected to be one of the largest offerings in history.

The initial filing with the US Securities and Exchange Commission indicates US$1 billion will be raised in the public offering, but that amount is expected to be greatly boosted with later amendments.

The IPO is part of efforts by the world's largest online retailer to expand globally.

The document leaves out information including whether the listing will be on the New York Stock Exchange or Nasdaq.

A group of investment banks will lead the offering including Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley and Citi.

Analysts say the listing is expected to raise somewhere around US$15 billion, which would make it the technology industry's largest IPO since Facebook's in 2012.

Talks between Alibaba and the Hong Kong Stock Exchange broke down last year, in part because the city's listing rules prevented Alibaba founder Jack Ma and senior management retaining some control over the board of directors.

Alibaba wanted an alternative class share structure to give selected minority shareholders extra control over the board, but the Hong Kong bourse declined to change its rules.

Alibaba operates China's most popular e-shopping platform, Taobao, which has more than 90 percent of the online market for consumer-to-consumer transactions. Taobao has more than 800 million product listings and over 500 million users.

- 'Strong player in China' -

Trip Chowdhry, analyst with Global Equities Research, said it remains unclear how well Alibaba will fare outside its home market.

"It's a very strong player in China, a little weak on mobile initiatives, very strong in payments," he told AFP.

"It may be a little premature to extrapolate the success of Alibaba outside China because in the consumer Internet space, it's not clear if citizens living outside China will trust a Chinese company with their information."

Yahoo holds a 24 percent stake in Alibaba and under the latest plans is expected to sell about 10 percent of the capital in the Chinese group in the initial public offering.

The US firm bought 40 percent of Alibaba in 2005 for US$1 billion and now stands to reap a handsome profit from that. Yahoo sold part of its stake in 2012, getting a gain of US$7.6 billion.

The Chinese firm has not yet released details on its finances, but Yahoo's figures showed Alibaba with a 2013 fourth quarter profit of US$1.35 billion on some US$3 billion in revenues. That indicates 66 percent growth, up from 51 percent in the past quarter.

While Alibaba is often compared to US online retail colossus Amazon.com, it has a distinctly different business model, noted Forrester analyst Kelland Willis.

Alibaba has no inventory or product delivery costs like those of Amazon. What Alibaba has in abundance is "an amazing user experience" and a platform visited by millions of people monthly, according to Willis.

"From a pure business perspective, their overhead costs are really just employees writing code," the analyst said.

"They also have a lot of cash flow."

The biggest threats to Alibaba are rival Chinese Internet firms wooing its users, according to Willis.

Being traded on a respected US exchange comes with prestige at home for Alibaba and lets it go head-to-head for investment money with online heavyweights such as Google, Apple, and Amazon.

Alibaba's IPO comes amid intense activity in the Web sector, but also concerns about excessive valuations.

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