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How would you answer if I asked you, “Who is is largest e-commerce company in the world, measured by the amount of business transacted?” Would you pick Amazon or eBay? Or, thinking that I was asking a trick question, would you go with Google? It really doesn’t matter, because if you named one of those big three, you would be wrong. The largest e-commerce company in the world is Alibaba.
Who? Alibaba. Based on the best information currently available, Amazon sales for 2013 were about $100 billion. Alibaba’s sales for the same period were $240 billion. That is not only more than Amazon, it is more than Amazon and eBay combined.
Why haven’t you heard of Alibaba? Because it is based in China and has been serving the Chinese audience exclusively. But now, the time has come for Alibaba to say, “Open says me,” or something like that. The company has announced that it has begun the process of launching an IPO in New York. No date has been announced as yet nor do we know on which exchange it will list, but we do know that Alibaba is expecting to raise in excess of $15 billion. At $15 billion, the IPO would be the 5th largest in U.S. history and the 4th largest since the turn of the Century.
Coming right along with Alibiba is Sina Weibo, the Chinese equivalent of Twitter. It will be seeking a modest $500 million in its upcoming IPO. Do not underestimate the potential of these two IPO’s or the companies themselves. A recent survey indicated that Chinese social media users number more than half a billion. It is estimated that Chinese people spend more that one billion hours per day on the internet. Don’t let Western paradigms fool you. China is not just a large, backwater country. China has about 170 cities with a population in excess of one million people.† By comparison, the U.S. has nine. Alibaba and Weibo are no small time, Johnny-come-latelys. Weibo’s monthly users numbered 71.5 million in March 2012. That had increased to 107.3 million by March 2013. By the end of the year, its users had increased to 129.1 million.
Just to make the investment decisions more interesting, Alibaba holds and 18% stake in Sina Weibo. In addition to that, Yahoo (NASDAQ:YHOO) – yes, Yahoo – owns a 24% stake in Alibaba. Yahoo stands to make a windfall upon the Alibab IPO, as it will be contractually required to reduce its stake, which it will do by selling off about half of its share. Since they will be sold below the IPO price, the sales should be quick and easy and Yahoo should gain as much as $15 billion dollars for itself.
At the end of the IPO day, it is likely that Alibaba could become the 2nd-largest internet company in the world, second only to Google. Alibaba founder, Jack Ma, is well on his way to building “a company in Chinese history that nobody has seen before.”
Keep watching this ADVFN newspage for updates.
† “How to Find Chinese Investors, Agents & Clients for Your EB-5 Projects & Services: A Practical Guide for Regional Centers, Attorneys, Developers and Businessmen,” 2013, by Gregory Finkelson, edited by Lou Gutheil
