Alibaba IPO: Waiting for a Window 阿里巴巴上市：等待时间窗口
The headlines have been flooded almost daily these last 2 weeks with the latest rumors regarding the much talked-about IPO for leading e-commerce firm Alibaba. The latest rumors from the last couple of days have cited a leaked internal company memo saying Alibaba plans to begin IPO preparations in the second half of next year, and could make a listing as soon as the end of 2013. (English article) Those rumors follows similar talk over the last week that the company is in the process of a major restructuring to organize Alibaba into 4 or 5 units around each of its key business areas. After rumors of the IPO came out, US media quoted still other sources saying that terms in the ongoing divorce between Alibaba and major stakeholder Yahoo (Nasdaq: YHOO) give Alibaba incentives to make its IPO closer to 2015. (English article)
So what is the truth in all of this? In my view, the sudden presence of so many rumors right now, even if some of those rumors are overstated or even outright wrong, means that something is clearly happening inside Alibaba in preparation for an IPO. Even if a later IPO would benefit Yahoo, that probably wouldn’t make a big difference to Alibaba, which has a track record of not really caring what its biggest stakeholder thinks.
Yahoo paid about $1 billion for 40 percent of Alibaba in 2005, but quickly discovered its ownership of such a big stake in the company gave it little or no voice in Alibaba’s management and strategic direction. After the 2 sides’ relationship soured under the leadership of former Yahoo CEO Carol Bartz, Yahoo finally agreed to sell its stake in Alibaba earlier this year, starting with the sale of around 18 percent of the company in September. (previous post)
So, to return to the main story, Alibaba is almost certainly conducting an internal reorganization right now in a bid to rationalize the company and make it easier for investors to understand by the time it makes its IPO. Based on the latest rumor, my guess is that the current reorganization will probably take at least a half year to complete, meaning we could see the new and more transparent Alibaba emerge around the middle of next year.
When that happens, Alibaba could invite investment bankers to start coming in to look at its books and make preparations for an IPO, which is roughly what the latest rumors are saying. That’s not to say that Alibaba would make an IPO anytime soon. Instead, all it means is that Alibaba would want to complete all the necessary preparations for an IPO by the end of 2013 so that it could move quickly to make an actual offering whenever the right window of opportunity opened.
The whole issue of IPO windows has been prominently on display these last 2 months, as such a rare window suddenly opened for US listings by Chinese companies in November after a nearly 2 year freeze-out. Unfortunately, most Chinese companies eagerly awaiting such a window were unprepared for the sudden thaw when it came, with the result that none were able to take advantage of the situation.
Alibaba’s chief Jack Ma has played in financial markets long enough now to know that good timing can add billions of dollars to a company’s valuation, hence his desire to have everything ready by the end of next year. If he does that, then Alibaba can have the luxury of giving itself a 2-3 year period to make its actual offering, quickly seizing on any positive window in market sentiment to maximize its fund raising potential and sharply boost its market value.
Bottom line: Alibaba is most likely aiming to complete preparations for an IPO by the end of next year, giving itself a 2-3 year window to make an actual offering when market conditions are right.
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