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Reports US

US stock market daily report (May 07, 2014, Wednesday)

May 8, 2014, Thursday, 05:21 GMT | 00:21 EST | 08:51 IST | 11:21 SGT
Contributed by Millennium Traders


In a filing to go public with the U.S. Securities and Exchange Commission on Tuesday, Alibaba - the Chinese Internet behemoth - proclaimed itself "the largest online and mobile commerce company in the world." Alibaba is making the move which is its first step to sell shares in the USA and to become one of the largest initial public offerings, ever. The company said it plans to raise at least $1 billion however, depending upon investor demand, that amount is expected to increase to possibly even more than the IPO for Facebook, Inc. (FB-Nasdaq) at $16 billion. The number of shares to be offered or when Alibaba will be going public, was not disclosed. Prize winner exchange - Nasdaq Stock Market or the New York Stock Exchange - was not disclosed either in an attempt to prevent any heated battle between the exchanges.

With stock exchanges in mainland China struggling and subject to restrictive controls, going public in the U.S. has become an attractive option for Chinese companies. While Alibaba spent months considering a listing on the Hong Kong stock exchange, the exchange refused to grant an exemption because Chinese regulators believed that it would violate the one-share, one-vote principle. Alibaba wanted to enable founders and top management the ability to nominate most board members despite holding a minority stake. By going public in the USA, Alibaba's 28 top partners would maintain the right to nominate a majority of the board, which would then be subject to a shareholder vote.

Alibaba is bigger than Amazon.com Inc. (AMZN-Nasdaq) and eBay Inc. (EBAY-Nasdaq) - combined - with nearly 231 million active buyers in 2013 who placed 11.3 billion orders across various online platforms. Price tag for all the merchandise purchased - nearly $250 billion. Alibaba operates China's largest consumer-to-consumer online shopping platform, Taobao; Tmall, China's largest third-party platform for brands and retailers and maintains a stake in microblogging platform, Weibo. During the nine months that ended December 31, their fiscal year ended March 31, Alibaba earned $2.85 billion on revenue of $6.5 billion for a profit margin of 44% and year-over-year profit growth of 304.8%.

Recently Alibaba has been increasing its stakes in companies, to bulk up its portfolio ahead of going public. During March, Alibaba invested nearly $692 million in Intime Retail Group, a Chinese department store chain in efforts to increase growth of its presence in the bricks-and-mortar space. For messaging app Tango, Alibaba led a $280-million round of financing and they recently acquired mapping and navigation company AutoNavi.

Chairman of Alibaba, Jack Ma, a 49 year old former English teacher from Hangzhou who owns 8.9% of the company, along with a group of 18 people, founded the company in 1999. Ma is easily ranked among China's wealthiest residents with a worth of nearly $15 billion. Japan's SoftBank has a 34% stake in Alibaba. Yahoo! Inc. (YHOO-Nasdaq), an early investor in Alibaba, holds a 23% stake which could be worth in excess of $40 billion.

In its F-1 filing the company said, "Alibaba is synonymous with e-commerce in China," as it already controls more than 80% of the e-commerce market in China. Going public on Wall Street will enable Alibaba to build name recognition in the U.S. although their focus shall continue to be growth in China where the vast majority of sales are offline and half the population has yet to connect to the Internet.

Out of 618 million Internet users in China, Alibaba said China had 302 million online shoppers during 2013. Alibaba expects large gains in online and mobile commerce in the coming years as the number of online shoppers increases and as consumers expand the categories of products and services they buy via the Internet.

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