Reporting on the recently announced IPO of Alibaba.com, Fox Business anchor Liz MacDonald, said as to how the Alibaba.com’s public offering has the potential to become the world’s biggest IPO with a value of $26 billion.
MacDonald reported that the total valuation of the company stands at $220 Billion, and the IPO of $26 Billion would beat even the US $16 billion IPO by U.S. tech giant Facebook Inc. (NASDAQ:FB) in 2012 as well as Visa Inc. (NYSE:V)’s $19.65 billion IPO in 2008. It is also higher than the world biggest IPO so far i.e. the IPO of Agricultural bank of China that was valued at $22.1 billion in 2010.
Describing Alibaba’s market, MacDonald said
“They are estimating 600 million people in the middle class in China. That’s about double the size of the U.S. population right now.”
Alibaba.com is expected to offer around 12% of its ownership stake in the IPO. MacDonald expressed concerns surrounding the IPO that relate to the shrink in margins for the company and also the ability of the company to generate profits out of advertising on mobile devices. The concern over margins was seen in the IPO filing of Alibaba.com, which disclosed that the rising cost of promoting mobile e-commerce business has resulted in margins falling from 51.3% a year earlier to 45.3% for the quarter ended March 2014.
This development will prove to be a big gain for Yahoo! Inc. (NASDAQ:YHOO), which had acquired a 40% stake in 2005 in the Chinese e-commerce giant for $1 billion. Yahoo! Inc. (NASDAQ:YHOO) is expected to be required to sell around a third of its current 22.6% ownership stake in the IPO.
At the current valuation for the IPO, the value of Yahoo! Inc. (NASDAQ:YHOO)’s holding comes to around US $49.7 billion. Similar to Yahoo! Inc. (NASDAQ:YHOO), Japan’s Softbank owns around 34.4% of Alibaba.com. It is expected that while the biggest gainers from the IPO will be Yahoo Inc. and Softbank, but they still won’t be able to have much control over Alibaba going ahead.
Meanwhile, Jacqueline Reses, who is the Chief Development Officer from Yahoo! Inc. (NASDAQ:YHOO), will be resigning from her board position at Alibaba.com.