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The anticipated Alibaba IPO is about to become a reality. We now know that it will take place on 18 September, that only “friends and family” will be able to purchase on that date before public trading commences on the NYSE the following day, and that the company’s ticker symbol will be BABA (NYSE:BABA). We also know that the opening price will be somewhere between $60 to $66 per share.
It is expected that the Alibaba IPO will become one of the largest in history, surpassing Facebook’s $16 billion. The company itself is expecting to raise more than $20 billion. That would give the company a valuation somewhere north of $160 billion. Some outsiders are predicting that a valuation in excess of $200 billion is possible.
We also know that CEO Jack Ma places customer satisfaction and employee satisfaction above investor satisfaction and that he has no reservations about saying so. That could make some potential investors a bit reluctant to jump on the Alibaba bandwagon. I am a big believer in Jack Ma’s philosophy. It’s not something he dreamed up on his own, but one he has ascribed to after astute observation. I have maintained for over 40 years that happy employees make for happy customers and that the combination of the two generate increased revenue and profits. That makes for happy investors.
Conversely, I believe that, when executive management focuses primarily on shareholder returns, that company is headed for big problems. As an investor, I expect healthy returns, but I still believe that those returns are best achieved by investing in a company with satisfied customers and employees. Plus, no matter what sector I invest in, the same principle applies. One analyst described this logic from Jack Ma’s perspective as, “If he treats his customers and employees right, at the end of the day he will have a good company for the investors.” That’s something that British banks should have considered.
Ma has a virtually limitless vision. He said recently that, “In the past decade we measured ourselves by how much we changed China. In the future, we will be judged by how much progress we bring to the world.”
Alibaba’s current dominance in the world of e-commerce sets it up, especially when fueled by more capital, to become even more dominant. The West seems to think that Amazon and eBay are the top players, but the reality is far different that our perception. Last year (2013) $248 billion worth of merchandise was sold via Alibaba. That’s twice what Amazon did and three times what eBay did. From yet another perspective, Alibaba shipped 700 million more packages than UPS in that same time period.
Expect Alibaba to continue to expand its reach, not so much by M&A, but by continuing its heavy investments in e-commerce and tech-related startups. It has already invested over $590 million in Western companies and is expected to announce an additional $10 billion in a new social networking entity, Snapchat.
Barclays will be the designated market maker for the Alibaba IPO. Goldman Sachs will act as the stabilization agent.
Mark your calendars for 18 and 19 September. We could be witnessing IPO history.
