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After much speculation and expectation, Alibaba is finally ready to go public. Not only that, the company is due to list on the US stock market which ultimately gives it more global investor appeal than if it were to list in its homeland of China. Listing in New York allows Alibaba to create a dual-class structure of stocks that will enable its founders and senior managers to retain their tight grip on the company.
The IPO is set to be one of the largest on record and the hype associated with it is likely to rival that of the Twitter and Facebook. The company claims to have had 129.1 million monthly active users as of year-end, compared with Twitter’s 241 million.
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Unsurprisingly, the chance to buy into Alibaba has generated a significant amount of investor interest. It’s becoming increasingly likely that the IPO could rival that of Facebook's $104 billion (£67 billion) offering.
Among the biggest beneficiaries of Alibaba’s success has been Yahoo, which maintains a 24% stake in the company. Presently the consensus view is that a minimum of $16 billion worth of capital will be raised when it goes public. Yahoo will be required to sell just under half its stake – not bad for a day’s work.
For now, the $40 mark for Yahoo is something of a barrier to upside, and of course there remains the question of what CEO Marissa Mayer will decide to do with these funds. The investment of $1.1 billion in Tumblr last year has yet to show any real return on investment, so the onus will be on Yahoo to provide investors with a reason for sticking around. Cash is not necessarily a solution for growth issues.
IG is offering a grey market on Alibaba where traders can take a position on where they see the company market cap at the close of the first day of conditional trading. As of today we have yet to see a seller. This has pumped up client expectations for a market capitalisation of around $250 billion.
Whether or not this level of heightened expectation can be sustained remains to be seen. Given the fact that we have surpassed the five-year anniversary of the current equity bull market, it’s more than possible that we have not yet seen the peak of the plethora of companies seeking to list.
Alibaba will be a tough one to top.