Finally, Alibaba has filed for its US IPO
City Index May 7, 2014 9:32 PM
<p>China-based ecommerce player, Alibaba Group, filed paperwork for a US initial public offering yesterday (6th May). The move is arguably rather unfortunate in timing, given […]</p>
China-based ecommerce player, Alibaba Group, filed paperwork for a US initial public offering yesterday (6th May). The move is arguably rather unfortunate in timing, given the sell-off in technology stocks of late.
Nonetheless, the IPO, which is touted as likely to be one of the biggest in history, has long been anticipated and will likely draw plenty of interest from investors.
While the company’s IPO prospectus indicates that it’s looking to raise $1bn, that figure is widely-believed to be a placeholder.
Indeed, expectations are that Alibaba will likely raise substantially more than the indicated $1bn, and sport a sizeable valuation to boot.
Simply put, Alibaba, which derives the bulk of its revenue from China, operates online marketplaces and can be compared to the likes of Amazon and eBay and, much like eBay, the company doesn’t hold inventory.
Alibaba claims to be the largest online and mobile commerce company in the world by gross merchandise volume in 2013 (or GMV, total sales value of goods sold over its marketplaces).
The company’s major shareholders include SoftBank (around a 34% stake) and Yahoo – whose shares have arguably been propped up by its stake of some 22% in Alibaba, but that’s a matter for a different article.
Yep, as expected, the company’s IPO prospectus threw up some impressive numbers: boasting 2013 GMV of $248bn, with 231 million annual active buyers and processing around 11 billion orders annually.
That’s translated into a healthy top and bottom line for Alibaba. For the nine months ended 31st December, the company took revenue of $6.5bn, that represents a healthy increase of 57% over the same period the year before.
Net income over that period came in at around $2.9bn, marking a notable 304% rise over the prior year. As at December, the company had a net cash position of around $3bn.
No, the company’s top line isn’t close to those of Amazon and eBay, but its profit margins are certainly impressive.
Alibaba’s EBITDA margin for its year-ended March 2013 came in at some 48%, versus eBay’s 2013 EBITDA margin of around 30%. Meanwhile, Amazon, known for its razor thin margins, doesn’t even come close.
On the mobile front, the company said mobile represented 19.7% of total GMV in the three months ended December, up from 7.4% in the same period the prior year.
That said, the company admits that mobile growth rates in the near term would be lower than rates achieved from websites, because its focus “is not on maximizing short-term mobile monetisation”.
Well, mobile is growing and while the company’s comment prompts pause for thought – given that it views monetization of mobile user traffic as critical to its growth – a potential bigger concern is perhaps the company’s governance arrangement.
The structure essentially gives control on how the company is run to its so-called partnership (made up of 28 members) – meaning new investors would have little say.
Still, there’s enough there to attract investors – and an equally arguably lofty valuation.