Innovation
Chinese e-commerce giant Alibaba files IPO document in US
By Michael Hennigan, Finfacts founder and editor
May 7, 2014 - 7:28 AM

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Jack Ma, founder of Chinese e-commerce giant Alibaba Group Holding Ltd.

Alibaba, China's e-commerce giant, has filed an initial public offering (IPO) document with the US Securities and Exchange Commission (SEC) with plans to raise $1bn.

Announcing the IPO in an internal letter to employees, Ma Yun (known internationally as Jack), founder and chairman of Alibaba,  said, "Becoming a listed company has never been our goal. It is a tactic and means to realize our mission."

Noting that being listed in the United States will expose Alibaba to challenges in the global financial market, Ma said: "Not all companies have the opportunities to face such global challenges. We are honoured to be one of them."

The Wall Street Journal says the IPO would value the company at more than $100bn, confirming the scale of its e-commerce operations ahead of what is expected to be one of the largest stock listings in history.

The filing showed that Alibaba is growing quickly and is very profitable, but the 2,300-page document didn't include some key information, such as the revenue for Alibaba's main marketplaces, how much the company makes from advertising or who will serve as the company's new directors after the IPO.

Revenue rose 57% in the final nine months of last year, and Alibaba kept more than 43 cents of each dollar of revenue as net income.

Alibaba valued itself at roughly $109bn in April, based on disclosures in the document about the numbers of shares outstanding and its internal estimate of the value of each share.

Including stock-based compensation and the conversion of certain preferred shares, the valuation is $121bn.

The Journal says both figures exclude the value of any shares Alibaba will sell in its initial public offering.

The company could seek a higher valuation in the share sale. Analyst estimates have ranged from $136bn to $250bn.

The filing showed the company had 231m active buyers in 2013. A total of $248bn was spent on Alibaba's three retail sites in China last year, roughly equivalent to the annual economic output of Finland.

Ma founded the operation in 1999 and Softbank of Japan owns 34.6% of the chares while Yahoo! owns 22.6%.

In the letter to Alibaba employees, Ma likened the IPO to a stop at a gas station. Below is a translation of the letter obtained by the WSJ's China Real Time.

New Opportunities, New Challenges, a New Journey

Dear Aliren,

In a few minutes we will officially submit our initial registration statement to the U.S. Securities and Exchange Commission. This means Alibaba is about to enter a new era of challenges.

Fifteen years ago, 18 founders of Alibaba came together determined to create a Chinese company that could be counted as a global Internet company, with hopes that it would become one of the world’s ten largest internet companies and that it would last for 102 years. Fifteen years later, we are lucky to still be here. We live better now than we could have imagined back then.

We understand it’s not how hard we worked or how smart we are that has gotten us where we are today, but the fortune of the era we live in. It’s thanks to the Internet, thanks to vibrant young people, thanks to a group of entrepreneurs who accompanied each other on the road to their dreams, thanks to the reform and opening of this country…

We know well we haven’t survived because our strategies are farsighted and brilliant, or because our execution is perfect, but because for 15 years we have persevered in our mission of “making it easier to do business across the world,” because we have insisted on a “customer first” value system, because we have persisted in believing in the future, and because we have insisted that normal people can do extraordinary things.

After we release the first draft of the company’s prospectus we will encounter all sorts of opinions. Over 15 years we’ve had lots of support, but behind the praise and applause, we have also faced criticism, blame and doubts. The best way to respond to all of this is to maintain a thankful and reverential attitude, and just as in the past, we must continue to follow our task of “making it easier to do business across the world,” we must remain dedicated to our work, we must continue to help small businesses succeed, and we must allow time and the results of our work speak for themselves.

A public listing has never been our goal. It is one important strategy and vehicle for fulfilling our mission. It is a gas station along the road to the future. But Aliren should be conscious that, lying behind the massive allure of the capital market, there is unparalleled ruthlessness and pressure. In this market, only a small number of outstanding enterprises can maintain a gallop. Alibaba will undoubtedly be confronted with unprecedented challenges and pressure due to the scale (of the listing), expectations, national boundaries, culture clashes, and regional politics and economics. Only by continuing to persevere and believing what we believe will we be able to survive for the next 87 years of hardship and the pressures and temptations. We are lucky and honored to be among the few companies capable of to face such global challenges.

After we go public, we would continue to adhere to the principle of “customer first, employee second, shareholder third.” We believe that, no matter what difficult decisions we face whether now or in the future, sticking with our principles is the best way to respect and protect the interests of all parties. In one sense, a public listing empowers us to better help customers, support employees and guard the shareholders’ interests.

Finally, I want to remind all of you to strictly comply with securities regulations and the group’s confidentiality rules, and not to make any public comment on the prospectus. All interviews should be handled through the group’s public relations department.

The human resources department will soon send out details of stock issues for each individual employee. This is truly a pleasing thing. We must stick to our principle of “living seriously and work happily.” Please work, contribute and donate to the society to the extent you can while taking care of your own wealth, yourself and your family. Thank you all very much.

“It is by the odes that the mind is aroused. It is by the rules of propriety that the character is established. It is from music that completion arises.” Aliren, the past 15 years have been difficult and exciting. Every single day of the future is bound to be extraordinary and complicated. If we don’t put in the effort today, we might not see the sunshine the day after tomorrow.  No business runs smoothly all the time. As we persevere in persevering, we must change for the customer, we must change for the world and we must change for the future.

Jack Ma

Chairman of the Board, Alibaba Group

2014.5.7


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