Tuesday, May 6, 2014

Alibaba IPO

Finally this is the much awaited IPO for the year.It will definitely loom large in size comparable to facebook or even bigger. Here are some of the statistics. It handled $248b value of merchandise  through Taobao and Tmall, processed about $519b of payments through Alipay, raked in revenues around $8b and  made $3.5b in profits. Unlike Facebook,WhatsApp, Twitter etc, this one actually brought in in excess of $3.5b profit last year!!!It even have a online bank Yuer Bao that put monies in money markets to allow customer to enjoy a higher interest rate than traditional banks.

Softbank owned around 35%, Yahoo around 22%,Jack Ma around 9% with other institutional investors like Silver Lake Partners, VC Yuri Milner,Temasek (I think) plus Jack Ma's original partners.It think Temasek got in at around $32b valuation of Alibaba when it was trying to pare down Yahoo 40% stake.

It is repeatedly touted that the company to be valued around $130b to $230b. Even at the lower end, it will be comparable to facebook IPO.

Will I ever going to purchase Alibaba share at these prices???At the higher end, it will sell for 70X last year earnings.At the lower end, around 35X to 40X last year earnings. The company faces challenges in mobile as on one fifth of its merchants have set up shop in WeChat owned by Tencent whereas Alibaba mobile messaging app Laiwang is still a flop at this point.Big merchants are pushing for their own online shops, JD.com and others is snapping on its heels etc.Tencent and Baidu are pushing aggressively in online commerce etc.

Although I am positive about Alibaba compare to most over-hype social media companies, I still think that the IPO price is going to be excessively high. Most companies will try to IPO high to extract maximum mileage.

However, Jack Ma has definitely come a long way from being a English language teacher in Hangzhou.

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