Alibaba Tests Waters for Group Listing 阿里巴巴试水集团整体上市

By newsdoug on March 5, 2012

Even as it continues the slow and tortured process of a massive buyback of shares from its biggest stakeholder, leading Chinese e-commerce firm Alibaba continues to test the waters for a potential mega-listing of itself, this time by releasing data on group-wide profits that highlight its fast-growth story. Chinese media are quoting a document recently filed with the US securities regulator saying Alibaba Group, 40 percent owned by struggling global search firm Yahoo (Nasdaq: YHOO), posted a profit of $339 million in the 12 months through October 2011, marking an impressive seven-fold increase from the previous 12-month period (Chinese article) The data show that the huge profit jump was clearly the result of Alibaba’s achieving economies of scale, since revenue grew by a much slower but still impressive 80 percent to $2.3 billion. Clearly the big jump in profits didn’t come from its Alibaba.com (HKEx: 1688) B2B marketplace, one of the group’s oldest assets and its only publicly traded one which has seen growth slow sharply in the last year as its business matures and it deals with a fraud scandal. Alibaba is in the process of privatizing Alibaba.com in its effort to downplay that slower growing part of its business and draw more attention to its higher growth units like its Tianmao online mall, formerly known as Taobao Mall, and its AliPay e-payments unit, both of which were probably major contributors to the big jump in profits. Of course people who follow this story will know that Alibaba is trying to buy out the 40 percent stake in the company held by Yahoo, in talks that have dragged on for months now. I’m quite certain that Alibaba is trying to buy back the stake for a price that will give it the highest valuation possible, as it probably plans to turn around and re-sell some or all of that stake at a premium to other investors. The latest disclosure of the group’s fast profit growth, combined with comments from an executive a few weeks ago (previous post), make it look increasingly like Alibaba is seriously considering a listing for the entire group company once it cuts its ties with Yahoo. I’ve previously said such an offering looks like a smart move, as Alibaba is a relatively rare case where its parts are probably worth more together as a package than as individual pieces, as they are all focused on the core e-commerce business and have many synergies. The company is reportedly trying to strike a Yahoo deal that would value it at $32 billion or more, and with these kinds of financials and general market hype created by founder Jack Ma it’s looking like he might actually get that valuation or even higher. He and his team have always hinted they think they should be valued in the same neighborhood as Baidu (Nasdaq: BIDU) and Tencent (HKEx: 700), China’s 2 most valuable Internet companies, now both worth about $48 billion. A group listing would certainly come close to helping him reach that target.

Bottom line: The release of group-level data on Alibaba’s rapid growth is the latest indication the company is weighing a potential listing of the entire group either this year or next.

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