When is the exact Alibaba IPO date? How much money does Alibaba make? What will the Alibaba stock price be?
These are just a few of the questions that investors have as Alibaba Group Holding Ltd. (NYSE: BABA) prepares for one of the largest IPOs in history.
Fortunately, we now have answers to the seven biggest questions concerning Alibaba stock ahead of the company's highly anticipated IPO...
7 Questions About Alibaba Stock Answered
Alibaba Stock Question No. 1: When will Alibaba stock start trading?
A: Multiple reports indicate that BABA stock will start trading Sept. 16, and will begin its "roadshow" on Sept. 3. According to Bloomberg, Alibaba and its underwriters will make 100 presentations during the roadshow, with stops in Hong Kong, Singapore, London, New York, Boston, Los Angeles, and San Francisco.
These presentations are the primary way for the company to sell Alibaba stock. While Sept. 16 is the most likely Alibaba IPO date, a delay is entirely possible. Founder Jack Ma and the rest of the Alibaba brain trust do not want to rush an initial public offering of this size.
Alibaba Stock Question No. 2: What will the Alibaba stock price be?
A: The Alibaba stock price on its first trading day will be determined in part by where the company prices the IPO. A specific price range has not been set for Alibaba shares yet, but investors will find that out in the days leading to the IPO. The company will announce the final price for Alibaba stock the day before the offering.
Once Alibaba stock hits the market, huge investor demand could send the stock soaring. When Twitter Inc. (NYSE: TWTR) debuted in November, investors flooded into the stock driving it up 73% in its first day and 188% in the first month. TWTR's trade volume was more than 117 million on the first day, contributing to that spike.
Similar demand for Alibaba stock on its first day would result in shares soaring as well. Even better is that Alibaba boasts much more profit potential than Twitter, supporting its stock price for the long term.
Alibaba Stock Question No. 3: Where will Alibaba stock trade?
A: BABA stock will be trading on the New York Stock Exchange, after the company deliberated between the NYSE and the Nasdaq. Alibaba should be the third-largest tech company on the NYSE behind International Business Machines Corp. (NYSE: IBM) and Oracle Corp. (NYSE: ORCL).
By picking the NYSE, BABA dealt a major blow to the Nasdaq, which has historically attracted tech companies. That trend seems to be fading however, as 22 of the 37 tech and Internet companies that held U.S. IPOs in 2013 chose the NYSE.
Money Morning members, continue reading for the answers to the most important questions about Alibaba stock...
Alibaba Stock Question No. 4: How much money does Alibaba make?
A: In an IPO filing update this week, Alibaba reported that its revenue in the second quarter was $2.54 billion, an increase of 46% from the previous year.
That was very important for Alibaba, because in the previous quarter the company had posted revenue growth of 39%. The fact that Alibaba's revenue growth is on the upswing just weeks before the IPO will only strengthen investor confidence as Alibaba stock hits the market.
Alibaba Stock Question No. 5: How big are Alibaba's profits?
A: Another extremely bullish figure revealed this week was Alibaba's profit. In the second quarter, BABA reported profit of $1.99 billion, nearly triple what it had last year. That came to roughly $0.88 per share.
The company did note that its operating profit margin was down to 43.4% from 50.3% last year, but that should not concern investors. Alibaba's costs rose dramatically in the quarter, 68%, as it increased its marketing efforts and made acquisitions ahead of its public debut. The fact that profits are growing at such a high rate is the most important detail here.
Alibaba Stock Question No. 6: Why are analysts so bullish on Alibaba stock potential?
A: The first reason is China's e-commerce industry. In 2013, China surpassed the U.S. as the world's largest e-commerce market with $298 billion spent online in the country compared to $263 billion in the U.S. By 2015, the number of online shoppers in China is expected to hit 520 million. In the U.S., that total will only be 200 million by 2015.
As the market grows, Alibaba is poised to profit considering 80% of all online transactions in the country take place over Alibaba's network of sites.
But it isn't just e-commerce that's growing - the entire Internet industry in the country is booming...
"The number of consumers and business folks connected to the Internet in China - whether you're talking about computers, tablets, or smartphones - is bigger than the entire U.S. population," Money Morning's Executive Editor Bill Patalon said. "And the government there is actually pushing growth. Beijing has mandated that 1.2 million folks - 85% of its population - will have broadband connections (3G or 4G) by 2020."
But one of the most bullish numbers heading into the Alibaba IPO is the firm's mobile user growth. In the quarter, monthly active mobile users grew to 188 million, an increase of 25 million from the previous quarter. Accordingly, mobile merchandise sales accounted for 32.8% of the company's gross merchandise sales, up from 27.4% last year.
Mobile growth has been one of Alibaba's biggest priorities as it plans for its initial public offering. The company has spent much of the last year investing in mobile companies like the messaging app Tango and "the Chinese Twitter" Weibo Corp. (Nasdaq: WB), in an attempt to grow its mobile user base.
Alibaba Stock Question No. 7: How can I profit from Alibaba?
A: You can start profiting today. The best news about the looming Alibaba IPO is that it has created a major profit opportunity that most investors haven't yet noticed... It's happening now, weeks before Alibaba stock hits the market...
In fact, this could be your one and only chance to make the kind of gains normally reserved for the high-net-worth investors and bankers. And there are three ways to play. You can learn more about this Alibaba profit opportunity here.