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Alibaba Files For IPO

Tyler Durden's picture




 

It seems "market conditions" are right for the big one...

  • ALIBABA FILES IPO INITIAL REGISTRATION $1B
  • ALIBABA GROUP HOLDING 2013 EPS 57C
  • ALIBABA GROUP HOLDING 2013 ADJ. EBITDA $2.67B
  • ALIBABA HOLDER YAHOO BENEFICIALLY OWNS 22.6%
  • 2013 EBITDA: $2.7 billion, 2013 Free Cash Flow: $3.2 billion
  • Pro Forma cash $7.9 billion

Here are some of the key details, formerly non-public, from its IPO filing...

 

Key metrics:

 

Key stakeholders:

 

The Alibaba ecosystem:

 

Active users:

 

Most active categories:

 

Company history:

 

Distribution centers:

 

Org Chart:

 

And for those seeking a primer, here is "all you need to know" from Bloomberg:

Just how dominant is Alibaba in China’s booming e-commerce market? In 2012, the homegrown Amazon/EBay mashup accounted for 70 percent of the country’s package deliveries. On one day last year, it logged $5.75 billion in transactions, and the business done over its sites accounted for the equivalent of almost 2 percent of China’s GDP in 2012. (Wal-Mart‘s sales in 2013, by contrast, are equal to about 0.03 percent of the U.S. GDP.) There are lots of  attention-grabbing Internet companies that hope to make money off of trend-hopping teens; Alibaba is  building an  empire on the spending power of Chinese farmers, laborers and white-collar workers. That could add up: By next year, more than 850 million Chinese are expected to be online — more than the population of any other country except India.

The Situation

In March, Alibaba announced plans to go public, and settled on New York as the venue for its IPO after Hong Kong regulators refused to approve its proposed governance structure, which would allow its partners to nominate a majority of its board. The company generated $3.06 billion in revenue in the three months ended in December — a 66 percent increase from a year earlier — and profit more than doubled to $1.35 billion.  Figures like that have led to estimates of its worth that have run as high as $245 billion. Alibaba, which faces competition from other Chinese companies like Tencent and Baidu, is investing heavily in reaching customers through smartphones and tablets. It owns stakes in messaging application TangoMe and ride-sharing program Lyft (now expanding to serve 60 U.S. cities), has its own mobile operating system and is leasing spectrum from state-owned phone companies to offer mobile voice and data packages. However fast Alibaba’s sales grow, e-commerce transactions in China are growing faster — the government projects that they will reach 18 trillion yuan ($2.9 trillion) next year — an 80 percent increase from 2013.

In March, Alibaba announced plans to go public, and settled on New York as the venue for its IPO after Hong Kong regulators refused to approve its proposed governance structure, which would allow its partners to nominate a majority of its board. The company generated $3.06 billion in revenue in the three months ended in December — a 66 percent increase from a year earlier — and profit more than doubled to $1.35 billion.  Figures like that have led to estimates of its worth that have run as high as $245 billion. Alibaba, which faces competition from other Chinese companies like Tencent and Baidu, is investing heavily in reaching customers through smartphones and tablets. It owns stakes in messaging application TangoMe and ride-sharing program Lyft (now expanding to serve 60 U.S. cities), has its own mobile operating system and is leasing spectrum from state-owned phone companies to offer mobile voice and data packages. However fast Alibaba’s sales grow, e-commerce transactions in China are growing faster — the government projects that they will reach 18 trillion yuan ($2.9 trillion) next year — an 80 percent increase from 2013.

The Background

Alibaba was founded in 1999 by former English teacher Jack Ma, who scraped together $60,000 from 80 investors to start an online marketplace for Chinese companies. He’s now worth an estimated $13 billion. When Ma saw a need for an Internet search engine partner, he connected with Yahoo! Inc. co-founder Jerry Yang. Yahoo paid $1 billion for a 40 percent stake in Alibaba in 2005. Alibaba’s Taobao Marketplace, which links individual buyers and sellers, and Tmall.com, which connects retailers and consumers, offer everything from Alaska salmon to Boeing 747s. But a large part of its growth has been fueled by mom-and-pop shops like those run by Liu Yuguo, a former farmer who has transformed his village in eastern China by taking its traditional yarn businesses online. More than 22 percent of Alibaba’s 7 million stores were based in villages and towns as of November, the company says. Alibaba aggressively defends its turf: When rival EBay made a fory into China in 2003, Alibaba countered by eliminating merchants’ fees on Taobao. Two years later, EBay closed its unprofitable China Web unit.

Source: China Internet Network Information Center

The Argument

The gigantic values analysts place on Alibaba speak for the bullish view of its growth potential. Yet some investors may be wary that Alibaba will suffer as China’s economic growth cools. The economy is forecast to expand 7.4 percent this year, which would be the slowest pace since 1990. Some investors have reservations about Alibaba’s management in light of its proposed board structure. Listing in the U.S. may bring more scrutiny for potential infringements of intellectual property, although Alibaba has made an effort to crack down on sellers of counterfeit goods.   And increasing competition on Taobao and Tmall is squeezing profit margins for merchants like yarn-seller Liu. If newcomers find it harder to make money on Alibaba’s platforms, the giant might start to grow more slowly.

 

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Tue, 05/06/2014 - 16:49 | 4733485 ebworthen
ebworthen's picture

It's the Internets!

It's the China!

BUY!!!

Tue, 05/06/2014 - 17:07 | 4733564 negative rates
negative rates's picture

What happened to the "moments ago" guy. This was perfect for such an opening.

Tue, 05/06/2014 - 17:13 | 4733589 DoChenRollingBearing
DoChenRollingBearing's picture

Ah, "Peak China" now?

Maybe I'll just wait until blockchain.info IPOs...

Tue, 05/06/2014 - 17:32 | 4733676 ml8ml8
ml8ml8's picture

Which company are they reverse merging into to go public?  Does Muddy Waters have their post-IPO report ready yet?

"I see a path to a valuation of $1 trillion for Alibaba."  --some equity analyst soon, probably.

 

Tue, 05/06/2014 - 18:02 | 4733800 lakecity55
lakecity55's picture

Could you not use it for getting roller bearings cheaper?

serious question, DCRB.

Tue, 05/06/2014 - 18:17 | 4733853 DoChenRollingBearing
DoChenRollingBearing's picture

We already buy what we need from China.  We have had several Chinese suppliers through the years, most with, erm, "mixed results"...  But, we now buy just the pieces we want (cheap "Hub and Bearing Assemblies") for car wheels, Delfu brand.  Delfu has an almost incredibly wide line, they will even make us new items if we commit to just 200 pcs each.  Try finding THAT among US factories.

The price quality ratio is the best we have found for Chinese product.  And adult Peruvians know what Chinese product means (we have our "Precio Nada Mas" customers).

***

For the Hyundai, Kia and Daewoo fleets, most of our customers prefer the Korean.  I don't blame them, Korea has a better image in Peru than here in the USA evidently.

Tue, 05/06/2014 - 19:19 | 4734044 Randy Goodnight
Randy Goodnight's picture

@DoChen - Off topic here but picking up your comment about Korean - KIA  I remember riding in a Kia in Chile some years ago and noting the quality to the person driving.  Long story short, purchased a KIA 6 months ago and love it.  My long term mechanic (car enthusiast) was impressed with the build.

Tue, 05/06/2014 - 16:50 | 4733497 Kaiser Sousa
Kaiser Sousa's picture

Fuck Ali Baba and his 40 Fucking theives....

more bullshit from a company that produces NOTHING OF INTRISIC VALUE...

Dow 50,000.

Tue, 05/06/2014 - 16:56 | 4733520 ebworthen
ebworthen's picture

Hey, maybe the ticker symbol will be "ALIBI".

Tue, 05/06/2014 - 17:01 | 4733545 laomei
laomei's picture

You obviously have no idea what you are talking about... funny.

Tue, 05/06/2014 - 18:54 | 4733975 Lore
Lore's picture

A shame that they choose to list in NY. I like this company a lot, but......

Tue, 05/06/2014 - 17:05 | 4733553 adr
adr's picture

But they connect you to people who do produce things of value.

Tue, 05/06/2014 - 17:08 | 4733570 negative rates
negative rates's picture

I think it could go quite a bit higher.

Tue, 05/06/2014 - 16:58 | 4733533 Stoploss
Stoploss's picture

Commie supporter Yahoo, largest holder, of course.

 

Tue, 05/06/2014 - 17:01 | 4733543 adr
adr's picture

Buy from Amazon for $15, or buy from Alibaba for $15 but get 5 units for that price. Alibaba sells direct from factories and you can buy almost anything. There are still only a few "merchants" selling single units but that segment of the site is growing rapidly. The biggest fear US retailers should have is consumers seeing what items really cost. Alibaba can upset the entire chain of US commerce once people realize that big box retail adds 500% markup just for putting something on a shelf.

Nearly everyone I have shown Alibaba to doesn't believe it. They don't believe the site because the products don't have brand names even though the products are exactly the same, made in the same factory. I showed my cousin that she could buy 15 pair of designer jeans for $250 shipped. The exact same jeans they sell at Express for $200. She refused to believe it. I tried telling her that Express only pays $15 for $200 retail jeans, but it was like talking to a brick wall. Women still believe a Coach purse is a piece of fine handcrafted merchandise. Reality is it is a piece of Chinese PVC made for $10.

Fuck Pulte homes made out of shoddy lumber and crap drywall for $20 a sq ft. I'll buy a kit home from Alibaba for $2.50 a sq ft and put it together myself. Is crap Chinese steel worse than shit fiberboard? Seriously go to Alibaba and check out the steel frame kit homes. Makes the 1950s prefabs look like rejects from a trailer park.

Alibaba should become the highest valued corporation in the world, but there is the slight problem that Alibaba relies on real commerce. In the new normal anything real is to be avoided.

Tue, 05/06/2014 - 17:12 | 4733588 laomei
laomei's picture

Yep, that's about all there is to it.  So many of those "name brands" you're familiar with do nothing more than slap their name on a widget coming out of a Chinese factory.  Then you look in another market, and it's the same exact widget with an unrelated brand on it.  The only variance is the quality.  But here's the catch... all that "crap made in China" is crap for a reason... because the importers (the people end users buy from) are unwilling to pay the extra cost. In fact, they rely on it falling apart to ensure you buy more.  

 

And those middlemen add so much markup it's just criminal.  $1 of materials turns out a widget the factory sells for $5 wholesale.  $5 widget costs $7 after shipping in bulk and other logistics costs.  Widget is then marketed, frilled up, and has to support entire departments of utterly useless people and presto chango, it's now $120.  

 

There's an entire cottage industry now of selling crap sourced from alibaba, drop-shipped worldwide via amazon and whereever else.  Mark it up 100% for doing literally nothing and tout it.  These are all utterly useless people adding zero value.  The ultimate fate of all middle-men is to be cut out.

Tue, 05/06/2014 - 18:13 | 4733842 Groundhog Day
Groundhog Day's picture

My friends father is in the clothing business.  they pay a designer a sick amount of money to make women's dresses, go to fashion shows where Macy's, bloomingdales, neiman marcus, nordstrom etc attend, show off the dresses, get orders from them,

Have them made in Hong Kong for 5-7 dollars......sell it to these chains for $15......and see them on the rack for $200-250.  So even on the huge 1 day sales, your still getting hosed.

Just think....even the manufacturer must be marking it up 100%!

and idiots flaunt their Ralph Lauren shirts which they paid $100 for with pride.....not to mention the free advertising for ol ralphy boy.....he must be laughing his ass off

Tue, 05/06/2014 - 19:29 | 4734072 Againstthelie
Againstthelie's picture

The power of brands is only there, because the sheeple are so incredibly stupid. I mean grown up men are identifying with the brand of their car, only because they like the ad on TV and associate themselfes with the artificially created image.

But it's not only brands of real goods. The same works in the sports industry. Sports has been destroyed by business decades ago, today these are only companies with brands and the "stars" are revenue generators, that today play here and the next season play there. No relationship with the regional name. But the sheeple spend another 100% markup on the 500% markup, to get a cap from their favourite brand advertiser - pardon: sports idol.

A zombie world.

Tue, 05/06/2014 - 18:18 | 4733852 Kaiser Sousa
Kaiser Sousa's picture

consume, spend, consume, spend, consume and spend til ur ass is broke and cant consume and spend no more on shit that aint about shit... i think i'll just stick to Physical Gold and Silver and pass on designer jeans and crap...

''yep, thats about all there is to it...."


 

Tue, 05/06/2014 - 17:54 | 4733769 Larry Dallas
Larry Dallas's picture

I'm a big headphone afficianado. I can tell you that when I plug in headphones, all the immitation shitty "beats" come up with "b" logo.

Have you ever been to a flea market? This is the shit they sell. This is the worlds largest knockoff fleamarket.

 

Tue, 05/06/2014 - 21:00 | 4734344 Blankenstein
Blankenstein's picture

Just like with Amazon, I would be very careful, as many of these 3rd party sellers sell knock-offs with bottom of the barrel quality.  I looked on the Express website and most of the jeans were $79 with a few pairs costing $88, $98, $118 and 2 pairs were $128.  There was a special of buy one pair, get one pair for $29.99.  Checking several different designs, they all seem to be imported, as was expected.  The jeans that are in the $200 range are almost all from companies who make their products in the USA and are much higher quality than imported jeans.  I wouldn't buy these from random 3rd party sellers, being that many of these brands are faked with greatly inferior products.

Tue, 05/06/2014 - 17:12 | 4733583 NOTaREALmerican
NOTaREALmerican's picture

Well,  with self-driving cars and Alibaba we won't need any employees anymore.    That's gotta be worth something.

Tue, 05/06/2014 - 17:46 | 4733727 NeedleDickTheBu...
NeedleDickTheBugFucker's picture

More like stepped in shit.  Yahoo's investment in Alibaba was made long before her arrival.

Tue, 05/06/2014 - 17:17 | 4733615 Lendo
Lendo's picture

Never heard of them 

Tue, 05/06/2014 - 18:56 | 4733971 flyingcaveman
flyingcaveman's picture

They make fake gold bars (gold coated tungsten) and sell them on the internet

 

oh, they sell other crap too other stuff too, its like the chinese Amazon.com

Tue, 05/06/2014 - 17:55 | 4733770 Itchy and Scratchy
Itchy and Scratchy's picture

Guess some ducks r still quackin'!

Tue, 05/06/2014 - 19:30 | 4734073 spine001
spine001's picture

I've been a registered user of Ali Baba since its beginning. My main problem withe the site is that it makes it impossible to know if somebody is a real seller or just a scam. I followed several scams, investigated them and reported them to Ali Baba at the time (2007) and to my surprise, no action was taken and the crooks and their adds remained in the site. I even had my bank investigate one of the guys. In my case the were all in Indonesia.
From that experience and the time I lost, I never have used it again, although I'm counted as a user.

Tue, 05/06/2014 - 21:08 | 4734379 naughtius maximus
naughtius maximus's picture

Alibaba and the 40,000 theives

Tue, 05/06/2014 - 21:16 | 4734409 espirit
espirit's picture

I was thinking more like Birmingham Alibaba.

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