NEW YORK – Alibaba Group Holding doesn’t want to be the next Facebook – at least for its prospective initial public offering. The world’s biggest online retailer is considering a more conservative valuation than what the social-networking company achieved last year, a person familiar with the situation said.
While Alibaba, based in Hangzhou, China, has said it has no timetable for an IPO, analysts are anticipating an offering this year or next. Proceeds from the IPO would be used along with additional cash to buy back stock held by Yahoo, said the person, who asked not to be named because the plans are private.
Alibaba, which has made Jack Ma a billionaire since he founded the company in 1999, is already in the early stages of a Facebook-like speculative fever over its valuation. With revenue projected to increase about 59 percent this year, echoing Facebook estimates at the time of its IPO, some analysts have said Alibaba could be valued at as much as $100 billion – right around the $104 billion price tag Facebook fetched in its offering.
While investors may clamor to own a piece of the world’s biggest e-commerce platform, that kind of price could produce disgruntled shareholders and a legacy of ill will if the stock drops – the same fate that befell Facebook, which went on to lose half of its market value. Investors, who have seen the most-traded U.S.-listed Chinese stocks fall 6.8 percent this year while the Standard & Poor’s 500 Index has rallied 13 percent to a record, also need to be comfortable with the price.
A more reasonable valuation might be about $62.5 billion, the median of eight estimates by investment banks and research firms since February, according to data compiled by Bloomberg. That’s 84 times the estimate of last year’s net income by Morgan Stanley analysts. Facebook’s IPO valued the company at 107 times the previous year’s net income.
If investors want to buy into the future, Alibaba’s growth potential and dominant status in China’s e-commerce business is irreplaceable, said Alex Wang Tingting, an analyst in Beijing at Internet consulting group iResearch. Investors will find Alibaba very attractive.
The company has no timetable for an IPO, Alibaba spokesman John Spelich said by phone. Ma, the executive chairman, said last year the company may go public within five years. Jonathan Lu will replace Ma as chief executive officer this month.
Alibaba doesn’t sell merchandise itself. Instead, it runs platforms including Taobao Marketplace and Tmall.com that connect retail brands with consumers, a cross between Amazon.com and eBay.