Chinese e-commerce giant Alibaba Tuesday filed its much-anticipated plans to sell shares in what could be one of the biggest initial public offerings ever.
Alibaba said it plans to raise $1 billion, but before it's finally priced later this year, that amount is likely to be far higher. The IPO is widely expected to surpass that of Facebook, which raised $16.4 billion in 2012, and could be nearly as big as the 2008 offering by credit card giant Visa, which raised about $17.9 billion.
Alibaba's registration statement was lengthy at more than 2,300 pages. But specifics about the IPO were scant. The filing did not specify an offering price.It did not say what exchange the American Depositary Shares would list on. And it did not
reveal what Alibaba's stock symbol would be.
Still, the filing did shed light on the company's impressive business model and growth trajectory.
Started by former English teacher Jack Ma in 1999, Alibaba is a mash-up of businesses, making the bulk of its revenue as an Internet middleman, charging sellers for marketing and advertising. Alibaba's Alipay division — which is not part of the IPO — is the world's largest payment processor.
At the end of 2013, Alibaba said it had 231 million active monthly buyers, up 44% from a year earlier. For the nine months ended in December, Alibaba generated net income of $2.9 billion on revenue of $6.5 billion.
Alibaba's potential market capitalization has soared since 2012, when it was valued at less than $40 billion following a bond offering. Tuesday's registration statement further underscored Alibaba's growth potential. Online shopping represented just under 8% of Chinese consumption in 2012. But that's projected to grow at an annual rate of 27% through 2016.
As the largest e-commerce player, Alibaba is also poised to benefit from mushrooming Internet use. About 618 million Chinese — 46% of the country's population — used the Internet in 2013. That's expected to rise to 790 million by 2016, Alibaba says.
Still, Alibaba could face increasing competition from Chinese rivals, such as Tencent, notes Forrester Research analyst Kelland Willis. "One of the biggest challenges Alibaba can expect to face in the next five years is stiff competition from both digital and e-commerce players,'' Willis says.
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Competition aside, Alibaba's IPO will create a windfall for Yahoo. The Internet search engine's Alibaba stake has helped bolster a sagging stock price under CEO Marissa Mayer's two-year watch.
Yahoo's decade-old investment in Alibaba has already paid off nicely. The company acquired a 40% Alibaba stake for just $1 billion in October 2005. In 2012, Yahoo sold nearly half its Alibaba holdings for about $7 billion. Yahoo, which holds a 22.6% share in Alibaba, has said it plans to sell 10% of its stake, creating a potential windfall for shareholders or allowing the company to pursue acquisitions.
Some analysts have valued Alibaba at upwards of $200 billion, meaning Yahoo's stake is worth nearly $50 billion.
Six investment banks are listed as IPO underwriters, including Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley and Citigroup.
Contributing: Elizabeth Weise.