Alibaba is China’s — and by some measures, the world’s —biggest online commerce company. Its three main sites — Taobao, Tmall and Alibaba.com — have hundreds of millions of users, and host millions of merchants and businesses. Alibaba handles more business than any other e-commerce company.
Alibaba is the most popular destination for online shopping, in the world’s fastest growing e-commerce market. Transactions on its online sites totaled $248 billion last year, more than those of eBay and Amazon.com combined.
You all know the headlines: the biggest ever tech float. The biggest ever Chinese float. The biggest ever US IPO. In fact, after yesterday’s increased price range, very likely the biggest IPO ever, with the potential to raise over US$25 billion. But what exactly is Alibaba? What does it do?
Through the whole history of internet and social media listings, there has often been a disconnect between the buzz of a new float on the stock exchange, and investor comprehension of how that company’s business model will work. I was in Hong Kong during the float of Tom.com in March 2000, and remember fights breaking out in the queues at brokerages (this was 2000, when people in Hong Kong still queued at brokerages for allocation) because everyone was desperate for a piece of the action – despite the fact that at the time, Tom.com had no assets, no clear business model, and barely even a web site. It did so because it was owned by Li Ka-Shing, the founder ofHutchison Whampoa and Cheung Kong Holdings , and the people of Hong Kong had faith that whatever Tom.com turned out to look like, it must be a success with Li at the helm. It was 670 times oversubscribed.
More recently, how many people who bought shares in Facebook had a clear understanding of how the company planned to monetize its extraordinary reach? How many really knew what its assets were? Not a majority, I would suspect; many instead believed that a company with such recognition, with contacts to so many people, must be able to perform as a stock too.
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