from the NYT dealbook--
WHAT THE ALIBABA I.P.O. MEANS
BY SYDNEY EMBER
After months of anticipation, it finally happened: The Chinese e-commerce giant Alibaba Group filed paperwork on Tuesday in the United States to go public, Vindu Goel, Michael J. de la Merced and Neil Gough write in DealBook. The move, they write, is "an embrace of the global capital markets that represents a coming-of-age for China's booming Internet industry."
In the filing, Alibaba said it intended to raise $1 billion in an initial public offering ? a figure used to calculate its registration fee. But the company is expected ultimately to raise $15 billion to $20 billion, which would make it the biggest American I.P.O. since Facebook's $16 billion offering in May 2012. When it makes its debut on the New York Stock Exchange or the Nasdaq market, Alibaba is also expected to have a share price that could value the company at roughly $200 billion, more than the market value of Facebook, Amazon.com or eBay.
Alibaba's prospectus was full of information, including a long list of risk factors. The filing also disclosed a handful of winners ? including a small group of Alibaba's top executives and the Japanese telecommunications company SoftBank ? who are set to reap a windfall for taking a chance on the once-scrappy start-up. Don't feel like getting into the meat of the filing? The front pages contain the names of the six firms leading the I.P.O.: Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Citigroup.
BEHIND THE NUMBERS Despite some impressive headline numbers, investors seeking to fully understand Alibaba may find more gaps than answers, DealBook's Peter Eavis writes. The lack of some crucial information in the filing ? including figures for the two online marketplaces that generate nearly all of the company's revenue ? could make it difficult for investors to compare Alibaba against other technology companies.
BEHIND THE NAME In a world of two-syllable Internet company names, Alibaba stands out. Read more about the company's name here. Read about the unlikely rise of Alibaba's founder, Jack Ma, who went from English teacher to dot-com billionaire, here.
A RISKY CORPORATE STRUCTURE? "Shareholders have been willing to take a lot of risk in their lust for Internet initial public offerings, but Alibaba's I.P.O. may take that risk to a whole new level," Steven M. Davidoff writes in the Deal Professor column. The reason is that investors in the offering will not have title to most of Alibaba's Chinese assets because of Chinese prohibitions on foreign ownership.
According to Alibaba's filing, the company will wholly own its non-Chinese assets, which provide the bulk of its revenue. Alibaba will not own most of its Chinese assets. "So the companies that are the core of Alibaba's Chinese operations - the main reason for the anticipated heated investor demand - will not even be owned by Alibaba," Mr. Davidoff writes. Instead, Alibaba is using a so-called variable interest entity structure, or V.I.E., which allows companies to circumvent Chinese restrictions in investment in certain industries, like technology.
But with the structure come certain risks. For one, it may be illegal under Chinese law. And because Chinese assets are often held by the chief executive or founder, a dispute with that executive can be fatal for the company. |
