Getting to Know Alibaba and Its Giant IPO
Alibaba, the Chinese ecommerce conglomerate, is planning to file its IPO papers this week.
It's expected to have one of the biggest public offerings in history, on par with Facebook, and worth an estimated $15 billion. (By contrast, Twitter was a mere $2 billion.) And following the IPO, Alibaba will rank fourth behind Apple, Google, and Microsoft, with an estimated value of $250 billion.
But most people have a hard time wrapping their heads around what Alibaba does exactly. Given that the enormous tech company has aspirations to become a global ecommerce entity, and has the wherewithal to become one, it's important to know some things about it. Here are some details, gleaned from two separate reports from the New York Times and Wall Street Journal:
Who, What, Where?
- Alibaba was founded by entrepreneur Jack Ma in 1999.
- Alibaba controls 80 percent of China's red-hot ecommerce market, which is expected to more than double to $700 billion in the next three years.
- It's an online shopping portal, with sales of $248 billion from seven million merchants in 2013, more than Amazon and Ebay combined. It earns money through three main sites, Taobao, a retail site; Tmall, a business-to-consumer ecommerce engine, and Alibaba.com, online wholesale.
- Alibaba is involved in payment processing and holds deposits. Alibaba runs transactions through payment processor Alipay, with which it has a complicated relationship. Alibaba spun off Alipay in 2011 to comply with China's foreign ownership laws. But Alibaba is rumored to be in talks to take a significant stake in the company again. Alipay holds roughly $80 billion in money market assets. Ma owns 50 percent of Alipay, in addition to his much smaller stake in Alibaba.
- For all its heft, though, Alibaba has annual revenues of less than $10 billion. That's small compared to Amazon, which notches close to $80 billion, and Google, which has roughly $60 billion.
- Net income, however, is around $4 billion and surpasses profits of both Amazon and Ebay.
- Net profit margins of more than 40 percent also trounce those of Google, Amazon and Ebay, which are at levels of half or less.
Ownership in a nutshell
Yahoo owns 25 percent of Alibaba, and founder Jack Ma still owns 7 percent. Japanese Telecommunications company Softbank owns close to 40 percent. The remaining third or so is carved up among disparate investors.