Alibaba In New Loan As Bankers Swoon 阿里巴巴或很快启动IPO
A flurry of news on e-commerce leader Alibaba indicates the company continues to grow at a rapid pace, with the spike of activity perhaps hinting that the process for a highly-anticipated IPO could soon start or may have already even begun. Topping the headlines is news that Alibaba is negotiating a massive $8 billion new loan. At the same time, recent new financial data for the company have just come out from struggling US search giant Yahoo (Nasdaq: YHOO), one of the Chinese company’s largest stakeholders. And perhaps most intriguing, an analyst at Barclays has just published his estimated valuation for Alibaba, putting the figure as high as $55 billion.
While that figure seems a bit high to me, the fact that investment banks like Barclays are starting to publish such numbers suggests that they are already vying to be part of a what is likely to become the biggest IPO ever for a China related firm. That means that investment banks may already be pitching to Alibaba to underwrite the deal, which could happen as soon as this year if market conditions remain positive.
Before we further discuss the IPO, let’s look at the more concrete developments, the biggest of which have media reporting Alibaba is in the process of negotiating an $8 billion loan. (English article) About half of the proceeds, or $4 billion, would replace previous loans that Alibaba used last year to privatize its Hong Kong-listed B2B e-commerce site Alibaba.com, and also for funds it used to buy back part of the 40 percent stake in the company held by Yahoo. The remaining $4 billion from this new loan would reportedly be used for general corporate purposes.
From an observer’s perspective, the half of this loan that would be used to refinance previous debt at better terms doesn’t look too interesting. But the $4 billion for general corporate purposes is a bit more intriguing, as it could be used in a future deal to buy back some or all of the remaining Alibaba stake held by Yahoo, which may be part of an eventual IPO deal.
Moving on, let’s take a quick look at the latest financials from Alibaba, which were released in a stock exchange filing last week by Yahoo. Media are reporting that in the 12 months through last September, Alibaba’s revenue grew 74 percent to $4.1 billion. (Chinese article) The company’s net profit attributable to Alibaba shareholders grew at a similar 81 percent rate to $484 million. All of those numbers look respectable, especially in an e-commerce space where most companies are currently losing money due to a series of non-stop price wars.
All of this is leading to the final part of my discussion, which is the timing of Alibaba’s highly anticipated IPO that is likely to raise billions of dollars. The company may have an incentive to make the offering sooner rather than later, as it is likely to want to get to market before its biggest rival, Jingdong Mall, which many believe is preparing an IPO for later this year. Alibaba may also want to tap a rare window of positive investor sentiment towards China Internet stocks, which has just emerged in the last 3 months following a prolonged period of negative sentiment.
All that said, we should return to the latest $55 billion valuation estimate from Barclays, which seems high for a company that was valued in the $30-$40 billion range when Yahoo sold part of its stake in Alibaba last year. (Chinese article) The Barclays estimate comes just a couple of weeks after Morgan Stanley released its own estimates for Alibaba that observers said value the company at $66-$128 billion. (English article)
To me at least, all these sky-high figures for a company that isn’t even publicly traded indicate the investment banks are already pitching to Alibaba to be included on the list of underwriters for its IPO. If that’s the case and the current market sentiment remains positive, we could see Alibaba move quickly towards a public offering, which could come as early as May or June but is more likely in the second half of the year.
Bottom line: The latest reports indicate investment banks may be pitching to underwrite Alibaba’s planned IPO, which could come as soon as the middle of this year.
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