Alibaba Group, the largest e-commerce provider in the world, expects to benefit from the rising spending power of China’s consumers. The company’s strategic plan is outlined in its prospectus for an American depositary receipt offering of a 12% stake in the company that could total a record $20 billion.

China already has the world’s largest Internet population, with 618 million users. The country’s online shopping population, however, is relatively underpenetrated, according to Alibaba. That means there is lots of room for growth, especially since consumers are expanding the range of products and services they buy online, the company noted. “We believe that the increased usage of mobile devices will make access to the Internet even more convenient,” Alibaba said.

Last year the average buyer on Alibaba’s online marketplaces placed 49 orders, up from an average of 39 orders in 2012, and 33 orders in 2011. According to iResearch, which focuses on the Chinese Internet market, online shopping in China is expected to grow at a compound annual rate of 27.2% from 2013 to 2016.


In its initial public offering document, filed with the US Securities and Exchange Commission on May 6, Alibaba revealed its lead underwriters: Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley and Citi. However, it did not disclose its depositary bank and said it was still trying to decide between listing on the New York Stock Exchange (NYSE) or the Nasdaq Global Market. Alibaba turned down the Hong Kong Stock Exchange, which raised issues about its governance structure.

Alibaba could eventually have a market value of between $150 billion and $200 billion, which would make it bigger than Amazon but not as large as Google or Apple. Yahoo, which owns 22.6% of Alibaba, is expected to sell a 9% stake in the IPO, which would give it the largest share of the proceeds.

“We envision that we will be a company that lasts at least 102 years,” Alibaba stated in its SEC filing. In a section on values, it adds: “We expect our people to approach everything with fire in their belly.” It says its marketplaces offer “a delightful shopping experience.”

The previous record IPO was Agricultural Bank of China’s $19.2 billion listing in Hong Kong and Shanghai in July 2010.


A string of smaller Internet-related IPOs from China rolled out the red carpet for Alibaba. Cheetah Mobile raised $168 million in its May 8 IPO on the NYSE, and its shares were priced at the top end of the expected range. The company provides security software used in smartphones and PCs. Online travel company Tuniu raised $72 million in an IPO on Nasdaq.

Weibo, China’s Twitter, raised $286 million in its Nasdaq IPO in April. Its shares rose 19% in their first day of trading. Chinese real estate website Leju enjoyed a similar price surge in its NYSE debut. Chinese online retailer, a major competitor to Alibaba, said it plans to raise up to $1.7 billion in its IPO and to list ADRs on Nasdaq.

Alibaba’s highly anticipated filing arrived just as the IPO market in the US was experiencing its lowest performance levels of the year, as measured by Renaissance Capital’s IPO ETF. Technology IPOs continued to get hammered in aftermarket trading, after shares of social
media site Twitter dropped 18% to a new low on May 6, the first day company insiders were allowed to sell the stock following its IPO last November.

If Alibaba does raise $20 billion, the figure would be larger than that of the combined 132 US IPOs from Chinese companies since 2005, according to Renaissance Capital.

Alibaba’s size, growth, profitability and significance in China make it the standout IPO of 2014, and possibly the decade, it adds.