Investors wanted more information before they invest billions in China’s leading e-commerce company and today they got it.
Alibaba Group Holding Ltd. today filed 364 pages of additional information with the U.S. Securities and Exchange Commission in advance of an initial public offering of stock on a U.S. exchange expected later this year. The document showed that Alibaba’s Tmall marketplace, which caters to such big brands as Apple and Gucci, represents a growing share of the company’s business. It also disclosed the names of the 27 individuals who will continue to run Alibaba and that the company plans to add four independent directors, including Yahoo co-founder Jerry Yang and the former chief executive officer of Hong Kong.
Here are some of the highlights of today’s filing:
- Tmall, a marketplace that allows brands to set up their own storefronts, is growing much faster than Alibaba’s main marketplace Taobao, where 8 million sellers compete in a wide-open online bazaar. Since the quarter ended June 30, 2012, the gross merchandise value of goods sold on Tmall has grown from 42 billion RMB ($6.75 billion) to 135 billion RMB ($21.7 billion) for the three-month period ended March 31, 2014, a quarter-over-quarter compound growth rate of 18.15%. For the same period Taobao’s sales grew from 167 billion RMB ($26.8 billion) to 295 billion RMB ($47.4 billion), a quarterly compound growth rate of 8.47%. Alibaba charges a commission of 0.3% to 5% of sales on Tmall depending on category, but does not charge commissions on Taobao, where it charges sellers to promote their products through advertising. “For the same amount of GMV transacted, the average amount of revenue we generate from Tmall merchants is higher than from Taobao Marketplace merchants,” Alibaba says in today’s filing.
- The filing disclosed the identities of the 27 individuals that make up the Alibaba Partnership, the group of longtime associates of Alibaba founder Jack Ma who run Alibaba, most of them executives at Alibaba or related companies like payment service Alipay. It also disclosed that, following its IPO, Alibaba will appoint four independent directors: Yahoo Inc. founder Jerry Yang; Chee Hwa Tung, who was chief executive of Hong Kong from its transfer to China in July 1997 to March 2005; J. Michael Evans, who was vice chairman of investment firm Goldman Sachs until stepping down in December 2013; and Walter The Ming Kwauk, a former executive of accounting and consulting firm KPMG and of technology company Motorola Solutions Inc.
- The company documented several recent investments, including having spent $270 million in building a logistics service to unit carriers across China, a company called Zhejiang Cainiao Supply Chain Management Co. Ltd. that Alibaba refers to as China Smart Logistics. Alibaba, which owns 48% of the logistics company, says it expects to complete its promised $385 million investment by May 2015. The company also reported on its previously disclosed investments in Weibo, a Chinese social network similar to Twitter, and plans to invest in a soccer team, Guangzhou Evergrande Football Club, or Evergrande FC.
- The company’s effective tax rate for its 2014 fiscal year was 11.9%.
- Alibaba, which is incorporated in the Cayman Islands and operates from offices in Hong Kong as well as in Hangzhou in mainland China, says it plans to keep the proceeds of the IPO outside of China. Analysts expect Alibaba will raise around $15 billion in the IPO. Alibaba says it will offer its shares either on the New York Stock Exchange or Nasdaq.
- In listing risks to its business, Alibaba noted several actions by Chinese bank regulators that could negatively impact its business. For example, the filing notes that regulations drafted by the People’s Bank of China would limit consumers from using funds in their bank accounts to make any purchase over RMB 5,000 ($804) through a third party like Alibaba’s Alipay online payment service, or RMB10,000 ($1,609) in total transactions in a month.