Sunday - Jun 25, 2017

Alibaba expected to raise around $26 Billion in their forthcoming IPO


Alibaba shakes up the world as their IPO reaches a record figure of $25 billion

As the Alibaba Group’s, owned by Hangzhou-based super entrepreneur Jack Ma, upcoming listing draws inexorably closer, considerable confusion is now reading amongst the many analysts and brokerages covering the IPO as to how much the Chinese e-commerce might actually be worth.

The latest, coming from Morningstar Inc., an investment research firm based in Chicago, Illinois, places Alibaba’s equity value in the region of $220 billion going on to appraise that the Chinese e-commerce giant’s forthcoming IPO will see them raise $26 billion.

Many economists see that as being a conservative figure with the Alibaba Group estimated to have a turnover of around $200 billion, more than their major rivals competitors eBay and Amazon.com combined.

If Jack Ma does achieve that kind of funding level, Alibaba’s would make be far and away the largest IPO in history, topping that of the Agricultural Bank of China who raised $22.1 billion offering on both the Shanghai and Hong Kong stock exchanges in 2010, leaving even the U.S.’s largest IPO to date in the shade, Visa’s $19.7 billion offer in 2008, while making Facebook $16 billion offering in 2012 fade into insignificance.

The general consensus amongst Alababa watchers is that Jack Ma is only interested in offering 12% of its stock in the IPO, making for the approximate $26 billion figure.

Online marketing analysts have long stated that Alibaba’s shopping sites are perfectly positioned to take maximum advantage from the growth in online marketing, thanks to their combination of powerful “network effects” – a vast pool of online retailers offering attractive and well priced products to hundreds of millions of shoppers, with increased growth in the market being generated due to enhanced confidence among consumers, not only in China or through Asia, but throughout the world to make fairly major purchases online.

It has long been established that China’s growing e-commerce market still falls considerable room for growth, driven by expectations that the country’s middle class population, those whose annual incomes average between $10,000 and $60,000, appear destined to double within the next five years, reaching around six hundred million.

These are the factors which most analysts agree will work very well in protecting Alibaba’s market dominance, and the high profit margins that they seem capable of consistently earning.

One possible cloud on the horizon may be the gradual consumer shift towards mobile e-commerce, which some experts say could begin to affect Alibaba’s margins due to the difficulties being experienced and marketing larger value products through mobile devices, which has been found to be more challenging than expected , especially in comparison to the traditional business model currently used to market products to consumers who surf the web using personal computers.

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