Alibaba IPO: E-Commerce Giant Confirms U.S. IPO

Alibaba Group Holding Ltd. confirmed yesterday (Sunday) what many had been expecting for months - that the Alibaba IPO will be filed in the United States.

Company officials stated that Alibaba has "decided to commence the process of an initial public offering in the United States. This will make us a more global company and enhance the company's transparency, as well as allow the company to continue to pursue our long-term vision and ideals."

Since the company first mentioned a potential IPO back in November, investors have been clamoring for information about where the deal would go down.

According to The Wall Street Journal, sources close to the company have estimated that Alibaba could raise up to $15 billion in its IPO. That would make it the fifth largest U.S. IPO ever, behind Visa Inc. (NYSE: V), ENEL SpA, Facebook Inc. (Nasdaq: FB), and General Motors Co. (NYSE: GM).

The Alibaba deal will almost certainly be the biggest U.S. initial public offering for a Chinese company. That title currently belongs to China Unicom Ltd. (NYSE: CHU), whose 2000 dual Hong Kong/New York IPO raised $5.7 billion.

Alibaba IPOAlibaba had been flirting with the idea of listing in Hong Kong, but the company was not comfortable with all of the listing policies required in China.

"We respect the viewpoints and policies of Hong Kong and will continue to pay close attention to and support the process of innovation and development of Hong Kong," the company stated.

Credit Suisse Group AG (NYSE: CS), Deutsche Bank AG (NYSE: DB), Goldman Sachs Group Inc. (NYSE: GS), JPMorgan Chase & Co. (NYSE: JPM), and Morgan Stanley (NYSE: MS) are all expected to be involved with the deal.

While the initial valuations for Alibaba's IPO have been high, determining where that final figures lands will be hard to gauge, especially considering Alibaba's recent growth...

Behind Alibaba's Rising Valuation

When the reports of an Alibaba IPO first started breaking last year, analysts estimated the company could be valued at $100 billion. In the following months, a string of acquisitions helped push that valuation figure all the way to $140 billion.

The size of China's e-commerce industry is another driving force behind Alibaba's ballooning valuation. According to the research firm McKinsey & Co., e-commerce in China is expected to be a $420 billion industry by 2020, up from $210 billion in 2012.

As China's largest e-commerce company, Alibaba is set to cash in on that growth...

The Journal has reported that more than $240 billion worth of merchandise exchanged hands over Alibaba's platforms in 2013. On China's "Singles' Day" holiday (Nov. 11, 2013), more than $5.7 billion was exchanged on Alibaba's network of sites in just 24 hours.

Alibaba collects a fee every time a transaction is made on one of its many sites. It owns one site that is similar to Inc. (Nasdaq: AMZN), another is comparable to eBay Inc. (Nasdaq: EBAY), and one is like PayPal. If you're making an online purchase in China, the odds are high that you're using an Alibaba-owned website.

Still another encouraging sign for Alibaba's IPO is its most recent revenue figures. In the first nine months of 2013, revenue was up 51% from the previous year to $1.78 billion. Net profit was up nearly 45% from 2012, at $792 million.

No date is set for the Alibaba IPO, but investors will want to keep a close eye on any move the company makes in the interim.

The company is determined to stay busy ahead of its IPO, as evidenced by its acquisition of 60% of ChinaVision Media last week. Acquisitions like that strengthen Alibaba's business model while also damaging competitors - and push the company's valuation higher.

Do you plan to invest in the Alibaba IPO? Tell us on Twitter @moneymorning using #Alibaba.

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