Alibaba envisions raising up to $24.3 billion

NEW YORK: 

Chinese online marketplace Alibaba unveiled plans to raise up to $24.3 billion in what could be the biggest stock flotation in history. The Initial public offering (IPO) is part of the company’s effort to expand globally.

The company would offer 320 million shares in a range of $60 to $66 per share with an option available for 48 million additional shares. The plan would raise a minimum of $19.2 billion even if the option for additional shares is not exercised by the underwriters.

Based on the price range, Alibaba would have a market value between $148 billion and $162.7 billion, in line with that of US online giant Amazon ($160 billion) and more than twice the value of eBay ($66 billion).

Alibaba, set up by Jack Ma in 1999, operates China’s most popular e-shopping platform, Taobao, which has more than 90 percent of the online market,800 million product listings and over 500 million users. The China-based group’s consumer services are similar to US Internet titans eBay, PayPal and Amazon.com.

The Company, however, does not sell products directly, instead hosts online venues such as Taobao where buyers and sellers can do business. This strategy has given the company an enviable profit margin as an online middleman of sorts. The Group made a profit of nearly $2 billion on revenue of $2.5 billion in the quarter ending June 30.

Alibaba earlier this year announced plans for a US marketplace called 11 Main, currently in a test phase. US Internet giant Yahoo bought 40 percent of Alibaba in 2005 for $1 billion and now stands to reap a handsome profit from that.

Yahoo sold part of its stake in 2012, getting a gain of $7.6 billion. Under the IPO plan, Yahoo will reduce its stake from the current level of 22.4 percent to 16.3 percent.The largest current shareholder is Japanese telecom group SoftBank, and its stake will fall from 34.1 percent to 32.4 percent.

A US government panel warned earlier this year that Alibaba’s complex corporate structure posed risks to investors.