Alibaba IPO 2014: Why This Chinese Giant's Value Keeps Rising

When rumors first began swirling last year about an Alibaba IPO, analysts estimated that China's largest e-commerce company could be valued as high as $100 billion.

According to a Reuters poll this month, eight analysts estimated that Alibaba could raise $15 billion through its IPO - at a valuation of $140 billion.

There's a reason why Alibaba's value continues to rise ahead of its IPO.

The e-commerce giant has been busy lately...

Alibaba Acquisitions Raise the Stakes

Last week, Alibaba announced it would be launching a U.S. e-commerce site through its subsidiaries Vendio and Auctiva.

The site, 11main.com, is designed as a "boutique" experience for online shoppers. According to the website, "11 Main is a shopping destination where hand-picked shop owners connect with customers in a stylish and professionally merchandised marketplace."

11 Main adds another dimension to Alibaba's diverse network of websites. One of Alibaba's sites works like Amazon.com Inc. (Nasdaq: AMZN), another like PayPal, and one is similar to eBay Inc. (Nasdaq: EBAY).

Importantly, 11 Main also lends additional brand awareness in the United States, where Alibaba is not yet a household name.

But the American online boutique is just one of Alibaba's recent ventures to ramp up excitement ahead of its IPO.

In the past year, Alibaba has spent more than $2 billion purchasing full and part ownership of more than 10 companies including web browsers, a social media site, a mapmaker, and a logistics company.

Alibaba wants the business to be stronger than ever when it files its initial public offering.

And while Alibaba expands its brand internationally, its financial numbers in China have been undeniable.

The Figures Behind the $140 Billion IPO Valuation

China is currently the world's second largest e-commerce market and was a $210 billion industry in 2012 according to McKinsey & Co. It's estimated that by 2020 that total could reach $420 billion.

As China's largest e-commerce company, Alibaba's network of sites accounts for 50% of the online sales that take place in the country. According to the company's founder Jack Ma, Alibaba is involved with roughly 70% of the country's package deliveries.

In the third quarter of 2013, Alibaba reported revenue of $1.78 billion - an increase of 51% from the previous quarter. That information came from Yahoo! Inc. (Nasdaq: YHOO), which owns a 24% stake in the Chinese company. Yahoo announces Alibaba's financial information with a one-quarter lag.

The massive potential for Alibaba was witnessed on Nov. 11, 2013...

Nov. 11 was "Single's Day." The Chinese holiday encourages bachelors and bachelorettes to shower themselves and each other with gifts in celebration of their single lives.

On that day, more than $5.7 billion exchanged hands in 24 hours over Alibaba's two main platforms, Taobao and Tmall. Now, Alibaba doesn't get all of that $5.7 billion directly, but it does make money off of transaction fees and advertising on those platforms.

There has been no official word on exactly when Alibaba will go public, although the IPO is expected sometime in 2014.

Investors anxious to get in on Alibaba's momentum don't have to wait for the IPO date to profit from this booming industry...

How Investors Can Play the Alibaba IPO Now

As mentioned, Yahoo! owns a 24% stake in Alibaba and its stock has been extremely profitable for shareholders in the last 12 months, up nearly 78%. But buying YHOO stock to get a piece of Alibaba now is an indirect play.

Money Morning's Defense & Tech Specialist Michael A. Robinson has pointed his readers to the KraneShares Trust (Nasdaq: KWEB). This exchange-traded fund doesn't currently own any stake in Alibaba, but the Chinese e-commerce giant is the type of company KWEB typically targets.

"Just look at what happened with YY Inc. (ADR) (Nasdaq: YY). The firm went public in December 2012, and KWEB got on board," Robinson said. "In fact, the fund has invested 3.4% of its assets in YY, which despite the market's recent weakness is up nearly 450% since the stock began trading in the U.S."

See Robinson's full breakdown on how investors can start making money off Alibaba well before the e-commerce giant goes public.

Have you heard of Alibaba? Are you interested in investing in its IPO? Tell us on Twitter @moneymorning using #Alibaba.

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