Chinese Internet behemoth Alibaba has filed to sell shares in the U.S., the first step in what is expected to be one of the biggest initial public offerings ever.
The company, bigger than Amazon.com Inc. and EBay Inc. combined, said it was raising $1 billion, but that number is a place holder and could soar — to possibly more than Facebook Inc.'s $16-billion initial public offering — depending on investor demand.
Alibaba Group Holding didn't specify how many shares it would sell or say when it would go public, which is typical in such initial filings. But analysts have estimated that Alibaba, when it does fill in the numbers in the next several weeks, will be worth as much as $200 billion. That's more than Facebook's $150-billion market cap, and more than half of Google Inc.'s $347-billion valuation.
Alibaba also didn't say whether it would list on the Nasdaq Stock Market or the New York Stock Exchange, an omission that IPO experts predicted would set off a heated battle between the two exchanges for the prized listing.
"They are a very dynamic firm that investors will want to have in their portfolio," said Josef Schuster, founder of IPO research and investment firm IPOX Schuster.
In its filing with the U.S. Securities and Exchange Commission on Tuesday, Alibaba proclaimed itself "the largest online and mobile commerce company in the world." It said it had 231 million active buyers last year who placed 11.3 billion orders across its various online platforms. Nearly $250 billion worth of merchandise was transacted across those sites.
Alibaba is often compared to EBay and PayPal, but its interests are much wider. They include banking, maps, cloud computing, online music service, and TV and film production.
It operates Taobao, Alibaba's biggest website and China's largest consumer-to-consumer online shopping platform, and Tmall, China's largest third-party platform for brands and retailers. The company also has a stake in microblogging platform Weibo.
The Hangzhou company is expected to go public in the fall after a road show in which it pitches potential investors, although it could debut as early as this summer.
Even though Alibaba is expected to have a monster IPO, the timing is no longer ideal, said Francis Gaskins, director of research at Equities.com.
"I think they missed the window because the investment climate has really changed. If they had gone public in December or January it would have been a lot easier for them; there would be more interest," he said. "But there's been a lot of skepticism around tech companies in the IPO market. The general enthusiasm for tech companies isn't what it was at the beginning of the year."
After a hot start to 2014, the tech IPO market has cooled considerably in recent weeks. The tech-heavy Nasdaq composite index enjoyed a remarkable run starting last summer through the beginning of March, when it rose more than 30% and seemed headed toward reaching its dot-com bubble high in 2000.
Instead, the market has deflated, causing such notable tech firms as mobile payments company Square and online storage provider Box to postpone their IPOs.
Facebook's stock has fallen 15% in recent weeks, while Twitter Inc. is 57% off its post-IPO high.
But Alibaba has size and profitability on its side, and has been experiencing the kind of rapid growth that most U.S. Internet businesses can only dream about.
At a time when many U.S. Internet firms struggle to turn a profit, Alibaba earned $2.85 billion on revenue of $6.5 billion in the nine months ended Dec. 31. Its fiscal year ends March 31. That represented a profit margin of 44% and year-over-year profit growth of 304.8%.
Alibaba's IPO underscores China's strength in the Internet industry and is part of a wave of Chinese companies going public in the U.S. this year. Twitter-like platform Weibo began trading on the Nasdaq last month, and Alibaba rival JD.com filed for a $1.5-billion listing in January.
Alibaba was founded in 1999 by a group of 18 people, led by Jack Ma, a former English teacher from Hangzhou, a city near Shanghai.
Japan's SoftBank has a 34% share; Yahoo Inc. was an early investor and still owns about a quarter of the company. Its 23% stake in Alibaba could be worth more than $40 billion, according to an estimate by PrivCo, a private company financial intelligence provider.
Ma, the chairman of Alibaba, owns 8.9% of Alibaba, according to the filing. That could make the 49-year-old's stake worth more than $15 billion, easily ranking him among China's wealthiest residents.
Going public in the U.S. has become an attractive option for Chinese companies. Stock exchanges in mainland China are struggling and subject to restrictive controls.
And in the U.S., "it's a way for institutional investors to play the Chinese consumer economy," Gaskins said.
Alibaba considered a listing in Hong Kong for months. But the company wanted to enable its founders and top management to nominate most board members despite holding a minority stake. The Hong Kong stock exchange refused to grant the exemption because regulators there believed that it would violate the one-share, one-vote principle.
In the U.S., Alibaba's 28 top partners would have the right to nominate a majority of the board, which would then be subject to a shareholder vote.
Although going public on Wall Street will help Alibaba build name recognition in the U.S., for now the company is expected to remain focused on growth in China, where the vast majority of sales are still offline and half the population has yet to connect to the Internet.
The company already controls more than 80% of the e-commerce market there. "Alibaba is synonymous with e-commerce in China," the company said in its F-1 filing.
Alibaba said China had 302 million online shoppers last year, out of 618 million Internet users. It said it expected large gains in online and mobile commerce in the coming years as the number of online shoppers increases and as consumers expand the categories of products and services they buy via the Internet.
Alibaba has recently been scooping up stakes in companies to bulk up its portfolio before going public. In March the group announced that it would invest about $692 million in Chinese department store chain Intime Retail Group to grow its presence in the bricks-and-mortar space.
It also led a $280-million round of financing for messaging app Tango. More recently it acquired mapping and navigation company AutoNavi.
Twitter: @byandreachang, @obrien
Chang reported from Los Angeles, O'Brien from San Francisco.Copyright © 2014, Los Angeles Times