The frenzy over Alibaba’s IPO

Alibaba Group, which is like eBay, Google, and PayPal rolled-up into one in terms of the range of offerings, is a hallmark of China’s inroad into the world-stage on Internet technology. Alibaba is a Hangzhou, eastern-China-based e-commerce giant that was founded by its Chairman and former Chief Executive Officer, Ma Yun (also Jack Ma), in […]

Alibaba Group, which is like eBay, Google, and PayPal rolled-up into one in terms of the range of offerings, is a hallmark of China’s inroad into the world-stage on Internet technology. Alibaba is a Hangzhou, eastern-China-based e-commerce giant that was founded by its Chairman and former Chief Executive Officer, Ma Yun (also Jack Ma), in 1999. The company consists of a family of Internet-based businesses that cover business-to-business (B2B) online marketplaces, retail and payment platforms, shopping search engine and data-centric cloud computing services. The company operates its business primarily out of China. Alibaba’s B2B marketplace is driven by www.alibaba.com, through which importers and exporters from more than 200 countries and regions are brought together.
Alipay (www.alipay.com) was deployed in 2004 as a third-party online payment platform that probably has the biggest market share in China, with a claim to more than 650 million users. Alipay partners with up to 100 financial institutions, including Visa and MasterCard, to provide payment solutions for Taobao.com and Tmall.com, both owned by Alibaba, as well as more than 460,000 Chinese businesses. Internationally, Alipay helps more than 300 worldwide merchants sell directly to consumers in China. It currently supports transactions in 12 major foreign currencies.
Alibaba’s founder has from the start longed for global acceptance and has more recently wanted the company to be seen as a purveyor of “clean” products and services. Ma hustled his way to create China’s largest B2B site that is a favorite among American and European companies that are buying from Chinese suppliers. At the age of 12, Ma became interested in learning the English language and becoming globalized. He eventually became an English teacher before dabbling into entrepreneurship. As to where Alibaba is going, Ma says “I want to create one million jobs, change China’s social and economic environment, and make it the largest Internet market in the world.” A testament to the power of goal-setting, backed by a burning desire, good plans, and persistence, Alibaba is certainly becoming the company that Ma dreamed of.
Ma takes global acceptance very seriously. There is the annual Alifest (in China), which I guess stands for Alibaba Festival, to which, according to Bruce Einhorn in the October 1, 2012 issue of Bloomberg Businessweek magazine, Ma has been able to attract  figures like former U.S. president Bill Clinton, ex-California Governor Arnold Schwarzenegger, and Starbucks CEO Howard Schultz. However, until recently, the Obama administration grouped Alibaba with an unsavory crowd of alleged copyright pirates in an annual list of notorious markets that the US says enable theft of American intellectual property (IP). Einhorn also stated that “the United States Trade Representative (USTR) took Ma’s B2B marketplace, Alibaba.com, off the name-and-shame list but kept Taobao Marketplace, Ma’s online mall, on.”
As I detailed on 22 October 2012 in this column, Ma diligently put some processes in place to fight the flagrant IP violations associated with his company. The battles across the pacific for Alibaba’s stock exchange listing in the event an IPO (in a few months) certainly attest to the company’s overall financial success and prestige.
The frenzy over Alibaba’s stock listing, which is expected to be marque listing, is nothing short of amazing. On the international dimension, it seems as if the company’s home exchange (Hong Kong Stock Exchange) has lost out to US-based exchanges, specifically, Nasdaq OMX Group and the NYSE Euronext, who are aggressively battling it out among each other to secure the listing. It’s a pot of Gold out there, as Alibaba could be valued at more than $75 billion. This amount is approximately twice as large as eBay’s and perhaps 10 times as large as Twitter’s, when Twitter eventually goes public. (Facebook was valued at $104 billion at IPO; it is estimated to be worth $80 billion today.)
Ideally, Alibaba would have wanted to be listed with the Hong Kong Stock Exchange, but Hong Kong has security laws that prohibit the issuance of dual classes of stock, and the exchange also lacks other company-friendly structures that allow a minority of stockholders to control a company. On the other hand, these are non-issues in the US, which has more liberal security laws. Companies like Google and Facebook enjoy the dual-stock class scenario, which kind of empowers a subset of the shareholders to effectively control the company and preserve, in these cases, the tech core. Alibaba wants this kind of control very badly.  The failure of Alibaba and Hong Kong Stock Exchange to reach a compromise last week Wednesday shifted the battle line to Wall Street in New York. The offering will also be underwritten by US banks.
Where Alibaba’s stock is eventually listed is probably not going to be as important as the role the event plays in shoring up the image of China.  
The main idea of this article is that the Chinese e-commerce behemoth, Alibaba, is vigorously preparing to launch its initial public offering (IPO); an event that may happen in a few months. Because of more liberal security laws in the US, Alibaba is most likely going to be listed there, to meet the founder’s wish to still control the company, post-IPO.