ETF Investors Bracing For Alibaba IPO

September 10, 2014

There’s a lot to consider about the Chinese e-commerce giant’s IPO.

Alibaba’s U.S. IPO roadshow is well underway this week, and it’s going extremely well for the Chinese e-commerce giant that plans to list its shares on the New York Stock Exchange, perhaps as soon as next week. ETF investors will soon be faced with choices once what looks likely to be the largest tech IPO is a done deal.

Reuters reported this week that in the first two days of its roadshow, Alibaba had already attracted enough investor interest to cover the entire cost of the deal. By most estimates, the IPO could easily raise more than $20 billion, going above Facebook’s record-breaking IPO in 2012 that raised $16 billion. It’s expected to price on Thursday, Sept. 18.

The huge buzz around the Alibaba Group IPO is entirely warranted. The company is a vast 21st-century virtual bazaar—a business-to-business marketplace, an online retail platform, a shopping search engine and a collection of cloud computing services, to name some of its business lines.

“Increasingly, retailing is taking place online and, regarding the big-box stores that we’re used to here in the U.S. that have really been hurt by technology and companies like Amazon or Priceline, China is jumping over that stage in a lot of respects,” Brendan Ahern, head of the China-focused ETF firm KraneShares, told in a recent interview.

Alibaba is expected to list on the NYSE under the ticker “BABA.”

Why This IPO Matters

Putting a finer point on the IPO, Ahearn said the deal is important because it should put China’s booming Internet expansion in focus.

Consider that in late August, Alibaba reported that revenues doubled in the second quarter year-on-year, while net income tripled thanks to a tenfold jump in mobile sales. The results pushed the company’s “internal valuation” to $140 billion, according to the Financial Times.

“The whole world is going to know the China Internet story because Alibaba is just going to be too big to ignore,” KraneShares’ Ahern said of the expected IPO.


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