Chinese e-commerce giant Alibaba Group Holding Ltd. launched its initial public offering today, with share prices set at $68, at the top end of the expected range. Within 20 minutes, the price jumped 40% to around $95 per shares.
Alibaba, trading under the BABA symbol, produces an IPO value likely be to just under $22 billion, creating one of the largest IPO in the world.
Alibaba’s IPO would give it a market value at $167.62 billion, which would surpass that of its U.S. rival Amazon.com Inc. Amazon’s stock today opened at $327.60 per share and its market value is around $152.8 billion today.
“If you look at China, you will see 600 million Chinese Internet users and about 300 million online shoppers and the economic growth is stable. There is still plenty of room for Alibaba to grow,” TD Ameritrade senior analyst Zhou Hui tells Internet Retailer.
Alibaba’s marketplaces sell more than the global web sites of Amazon and eBay Inc. combined. Alibaba reported the value of merchandise sold on its e-commerce marketplaces in the three months ended June 30, 2014 reached 501 billion yuan ($81.6 billion). By comparison, the combined gross merchandise value of eBay and Amazon, No. 1 in the Internet Retailer 2014 Top 500 Guide, in the same period would have been about $50 billion, according to an Internet Retailer analysis of their financial reports.
Alibaba could have $8 billion in cash after its IPO and it has planned to invest more in international markets. “After our IPO in the United States we will vigorously expand in Europe and the United States,” Alibaba founder and executive chairman Jack Ma said this week during an investor roadshow. “Meanwhile, we will not give up on Asia.”
But Alibaba also faces stiff competition at home from growing competitors, even if none of them comes close to Alibaba in size. Alibaba’s two big e-retail marketplaces in China, Taobao and Tmall, accounted for $248.7 billion in purchases in 2013, more than 81% of online shopper purchases in China last year.
Rivals JD.com Inc., No. 1 in the Internet Retailer 2014 China 500, the largest Chinese direct-to-consumer e-retailer and Tencent Holdings Ltd., one of the largest Chinese Internet companies, have announced a strategic partnership that includes merging their web retailing businesses.
JD acquires Tencent’s two e-retail sites and Tencent promotes JD.com in its popular mobile messaging platforms, the WhatsApp-like WeChat and its QQ instant-messenger service.
From a long-term perspective, JD.com has a bright future, Zhou says. “They sell directly to the consumers and fulfill the orders by themselves. They are increasing their sales constantly and their profitability will grow as well” Zhou adds.
Alibaba’s international business is growing much faster than its business in China. Alibaba’s global retail marketplace Aliexpress sells $4.5 billion to consumers from 220 countries outside of China in the 12 months ended May 31.
Alibaba’s revenue from Aliexpress doubled in the quarter ended June 30, 2014, from the year-ago quarter, to 358 million yuan ($58 million) from 179 million yuan ($29 million.)
To contrast, GMV of Alibaba’s two Chinese retail marketplaces Taobao and Tmall grew at 60.5%, according to its filings with the U.S. Securities and Exchange Commission.
Alibaba says the growth in sales on AliExpress comes from the increasing number of buyers in such countries as the United States, Russia and Brazil.
The daily orders from the U.S. consumers have exceeded 13,000, according to Aliexpress.
“Aliexpress is growing fast but it is designed for serving the value pursuing consumers. After the IPO, I anticipate Alibaba may open a premium brand store marketplace in the U.S., just like its Tmall in China if they want to enter the U.S. e-commerce market directly.” says Kelland Willis, an analyst at Forrester Research Inc.
Alibaba’s Tmall, a marketplace for premium brands like Apple, Nike and Gap, is growing dramatically, with sales increasing 105.1% year-over-year in 2013.