AliBaba's IPO coming soon. Should I invest?

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AliBaba's IPO coming soon. Should I invest?

Postby General Mackevili » Thu May 08, 2014 8:57 pm

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The Chinese technology company Alibaba filed in the U.S. today for its initial public offering. What is Alibaba, you may be asking if you’re not Chinese or an obsessive reader of tech blogs? It’s an e-commerce company, a mix of Amazon (AMZN), EBay (EBAY), and PayPal. There’s Tmall, an online shopping mall; Taobao, a marketplace where small Chinese companies can sell directly to consumers; and Alipay, a digital payments company that Chinese consumers use through their mobile phones for all sorts of transactions, on Alibaba sites or off.

And why is this a big deal? Because Alibaba does huge business, and therefore is going to be worth a lot of money. Last year, Alibaba sold $248 billion in goods—everything from frozen fish fillets to Nike sneakers to used jetliners. In one day last year, it saw $5.8 billion in transactions. Alipay was used in payments worth $519 billion. Alibaba is the biggest e-commerce site in the world’s fastest-growing economy, one where many inhabitants aren’t even online yet. Because it functions largely as a marketplace, Alibaba’s operating costs are relatively low, and that, along with its very low taxes, means it enjoys profit margins of 45 percent.

Analyst estimates for the company’s post-IPO value range from $136 billion to $245 billion. If it’s anywhere but at the bottom of that range, that means the company will be more valuable than Facebook (FB).

STORY: How Alibaba's IPO Is Even Helping Its Rivals
Big winners from the sale will include Alibaba founder Jack Ma, who owns 8.9 percent of the company, Russian entrepreneur and investor Yuri Milner, and the American private equity firm Silver Lake Partners.

Yahoo! (YHOO) owns 22.6 percent of Alibaba, a fact that has been one of the few things bolstering its stock price. It will sell off a little less than half of that stake in the offering, for what is estimated to be at least $10 billion, and there’s already speculation about what the company will do with it: go on a buying spree of smaller companies? Buy back shares?

One of the questions analysts asked in the days leading up to the IPO filing was how much Alibaba would look to expand beyond China. In its prospectus the company seems to keep its focus at home. The company points out that China has far less retail space per capita than the U.S. and wealthy European countries—0.6 square meters per person, compared with 2.6 square meters per person in the U.S.—while at the same time online shopping still makes up only 7.9 percent of Chinese consumption. And consumption in China in 2013 made up only 36.5 percent of gross domestic product, as compared with 66.8 percent in the U.S. China, it seems, has only begun to shop.
http://www.businessweek.com/articles/20 ... hould-care

They are bigger than both eBay and Amazon combined. And they also ship to Cambodia!

However, reading some other articles about their IPO on the New York Stock Exchange in the US make it sound like buying shares on there is a slightly sketchy investment because the Chinese gov doesn't actually allow foreigners to own certain strategic assets.

Hmmm.. Maybe I should just stick with buying Yahoo stocks right now.


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Re: AliBaba's IPO coming soon. Should I invest?

Postby OrangeDragon » Fri May 09, 2014 1:43 am

aside from chinese law, which would need researched, they ARE a good IPO investment. they've been on a steady growth trend for a while. however if chinese law is prohibitive, then it would be an issue... not only for your own investment, but also for the fact that preventing foreign investment in it would make the shares much harder to sell and will stagnate, to some extent, their value.
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Re: AliBaba's IPO coming soon. Should I invest?

Postby Sir_Quality_U_Feel » Wed Jun 11, 2014 4:08 pm

I was always under the assumption that us little guys cannot buy into IPOs, as the NYSEand NASDAQ are setup for IPOs to attract a few big investors. When Google went public, I called my financial planner and asked if I could throw a few thousand dollars at it. He laughed and said" Nope" and proceeded to explain to me basically how you would need a big investment. Perhaps I heard him wrong and this was years ago ( google's IPO)

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Re: AliBaba's IPO coming soon. Should I invest?

Postby General Mackevili » Wed Jun 11, 2014 5:17 pm

Sir_Quality_U_Feel wrote:I was always under the assumption that us little guys cannot buy into IPOs, as the NYSEand NASDAQ are setup for IPOs to attract a few big investors. When Google went public, I called my financial planner and asked if I could throw a few thousand dollars at it. He laughed and said" Nope" and proceeded to explain to me basically how you would need a big investment. Perhaps I heard him wrong and this was years ago ( google's IPO)

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Yeah, maybe a lot has changed in 10 years.

I think there's some truth in that.

It's sold to a big firm pre-IPO and later listed on the stock exchange.

I don't think us little guys can buy it at the IPO price, but once it's listed and they get offers they want to take, it will be public and you can buy them yourself, even with an online broker. Again, the price could be double what the IPO was set at, and the investors that hold them might not even sell them right away.

I basically meant buy it ASAP when it's actually being traded amongst the little guys, which shouldn't take long at all now with the internet, etc.

Did you buy Facebook?
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Re: AliBaba's IPO coming soon. Should I invest?

Postby OrangeDragon » Wed Jun 11, 2014 7:01 pm

You need an an IPO allocation... to do this you have to have a trading account with one of the underwriter banks and already established with them as a frequent trader and a decent sized account, then they'll let you in on it. Otherwise, no chance. The whole reason an IPO exists in the first place is to let them pad themselves with a big wash of cash all at once... by essentially promising the bank (or banks) that gives them the cash (the underwriter) that they have first go at the stocks.

An IPO is the process of turning equity into cash... the bank gives them the cash in exchange for being able to make stocks valued on their equity, which they can later sell. The company gets a certain number of those stocks themselves, as they're not cashing in 100% of their equity. Sometimes, like with google, they hand some of these out to employees as a profit share incentive, but they're not allowed to trade them (unless it's by selling them back to the company at a cut rate).

As soon as the SEC approves the IPO the underwriter will (try to, since they haven't decided a price yet) sell it out it's portion to some major institutional investors they've already lined up all at once.
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Re: AliBaba's IPO coming soon. Should I invest?

Postby ali baba » Thu Jun 12, 2014 7:49 pm

My ears are burning ;)

Why is AB listing in the US rather than China or HK?
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Re: AliBaba's IPO coming soon. Should I invest?

Postby OrangeDragon » Thu Jun 12, 2014 10:23 pm

ali baba wrote:My ears are burning ;)

Why is AB listing in the US rather than China or HK?
$$$$$$$$$$$$$$$

When launching an IPO listing in the US makes more sense. More investors with ready and liquid cash.

Chinese and HK can still trade on that market and invest through brokers pretty easily... but the same isn't as easy the other direction.
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Re: AliBaba's IPO coming soon. Should I invest?

Postby ali baba » Mon Jul 14, 2014 8:04 pm

OrangeDragon wrote:
ali baba wrote:My ears are burning ;)

Why is AB listing in the US rather than China or HK?
$$$$$$$$$$$$$$$

When launching an IPO listing in the US makes more sense. More investors with ready and liquid cash.

Chinese and HK can still trade on that market and invest through brokers pretty easily... but the same isn't as easy the other direction.
According to the Economist it is in order to enable dual-share.
JACK MA wanted to list Alibaba on the Hong Kong stock exchange. The founder and chairman of China’s biggest internet firm had hoped that local authorities would accept his demand that a small clique around him would maintain control of the business after flotation. But officials in Hong Kong refused to allow such a share structure, and so Alibaba headed to America, where the founders of technology firms like Google commonly use dual-share structures to ensure they stay in charge.
http://www.economist.com/blogs/schumpet ... ibabas-ipo" onclick="window.open(this.href);return false;
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Re: AliBaba's IPO coming soon. Should I invest?

Postby General Mackevili » Mon Jul 14, 2014 8:07 pm

Every time I see the title of this thread, I think someone is trying to sell you, Ali Baba.

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Re: AliBaba's IPO coming soon. Should I invest?

Postby nightmare.believer » Mon Jul 14, 2014 8:18 pm

Never invest in a company whose books are...shall we say opaque.


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