When investors get too pumped up on a Chinese internet stock, things tend to get ugly. But for now, word on the Street and in Shenzhen is that Alibaba's initial public offering this quarter will be the largest the world has ever seen.
Although China's social media firm RenRen was not as large, around $740 million, the financial press and talking heads on CNBC saw this as a sign that China was going to take over social media. To some extent, it did, with SINA's Weibo microblogging site now having more users than Twitter. The bad news for RenRen investors is that the stock is now 80.2% lower than it was when it listed on May 4, 2011.
Alibaba is more Amazon than Facebook. And investors are excited about China spending more time — and money — on line. China's online shopping headcount is expected to go to 380 million from 145 million today, according to the Boston Consulting Group.
"Alibaba is best of breed. This is a number on name," Tim Seymour, an emerging markets hedge fund manager at Triogem Asset Management, said on CNBC this week.
Alibaba Group's business-to-business website, Alibaba.com Alibaba.com Ltd. delisted from the Hong Kong exchange in 2012 and went private. The share price shot up over 100% in that IPO before delisting at the original offering price, some 50% below where the market had taken the stock on its opening day, but flat when compared to the original offering price.
The parent company and its bankers are reportedly moving to throw their own shares behind the latest offering in New York, pushing the IPO's projected value well past the $20 billion mark, China Daily reported on Thursday.
Billionaire Jack Ma, the executive chairman of the Alibaba Group. The market anxiously awaits what will likely be the world's largest ever initial public offering. (Photo credit: Wikipedia)
If that happens, it will be bigger than Facebook's $16 billion listing in 2012 and bigger than the 2010 IPO of state-run Agricultural Bank of China, which brought in $22.1 billion. Visa's $19.7 billion offering in 2010 is the largest IPO ever held in the US, according to IPO tracking site Dealogic.
Alibaba would eventually like to grow beyond China and take on rivals like Tencent, the social messaging and video game company.
Alibaba sold $240 billion of merchandise in 2013. With more than 7 million merchants selling on its website, it posted over $2 billion in revenue and around $1 billion in profits last year. The company is also looking to expand beyond e-commerce and is moving into the media and entertainment space, with the company's billionaire founder Jack Ma acquiring a stake in Youku, China's Youtube, which will eventually go to Alibaba.
Alibaba's stock offering may start a global fight for online shoppers. Alibaba's massive influx of cash from its IPO would ultimately give it a war chest not only to take on Tencent, but also E-Bay and Amazon in the years ahead.
China's expanding middle class are become more plugged in. Alibaba therefore has the world's largest online consumer base, giving it ample reason to spend on innovation.
"The sheer manpower" China can bring to digital innovation is "huge", and "extremely important", said Paul-Bernhard Kallen, CEO of German media company Hubert Burda Media, during an interview at the Digital Life Design conference in Manhattan this week.
A Feb. 6 report by the National Science Board, the policy-making body of the U.S. government's National Science Foundation, said U.S. predominance in science and technology has "eroded further during the last decade" while China has rapidly increased their innovation capacities.
The US's share of global research and development since 2001 dropped to 30% from 37%, while China's share grew to 15% percent from 4%, according to the report.
See: China To Lead Digital Revolution – China Daily
Alibaba Interested In Online Payment Company – Bloomberg Bloomberg
What You Need To Know About Alibaba IPO – CBNC
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