Amazon's Little Brother Could be the Largest IPO in History

Chinese internet giant Alibaba announced a planned $1 billion IPO yesterday. When the dust settles, the company could become the largest IPO of all time.

May 7, 2014 at 1:00PM
Take The Long View

The Dow Jones Industrial Average (DJINDICES:^DJI) was up about 84 points in early afternoon trading following Federal Reserve Chairwoman Janet Yellen's testimony this morning on Capitol Hill.

The Nasdaq (NASDAQINDEX:^IXIC) was down over 1%, though, dragged by household names like (NASDAQ:AMZN) (down 2.9%) and Facebook (down 3.4%).

Speaking of giant global tech stocks
Giant Chinese Internet company Alibaba filed yesterday for its initial public offering, stating that it intends to raise $1 billion. It is not yet known if the company will trade on either the New York Stock Exchange or Nasdaq, nor what the ticker symbol will be.


The $1 billion headline number is likely just a short-term placeholder for the company as the bankers and underwriters work the market to raise a whole lot more cash than that. 

For example, when Facebook filed its IPO in spring 2012, the company initially filed to raise just $5 billion, but it ended up with over $16 billion in cash proceeds.

What does Alibaba actually do?
Alibaba's stated mission is to "make it easy to do business anywhere." To do this, it offers retail e-commerce and mobile business, wholesale trade, cloud computing, and other services. Alibaba owns and operates a variety of websites in China and globally. 

The company's IPO filing did not break down the business by division or products, but it's fair to say the company's online retail segment is almost certainly the primary driver.

You can see the company's full list of websites here.

Does this all seem familiar? The model is not a far cry from Amazon.

Amazon Box Fool Flickr

In terms of size and scale, however, Alibaba has a long way to go before it catches up. For for the nine months ending Dec. 31, 2013, the company brought in $6.5 billion in revenue that generated $2.85 billion in profit. Amazon brought in $19.7 billion in revenue in the first quarter alone.

Still, Alibaba's numbers are impressive, and the company could certainly supercharge its growth with the capital proceeds from the IPO. With that growth, many observers see Alibaba as being a contender to enter the U.S. market and challenge Amazon like no other company could. 

How big would the IPO have to be the largest of all time?
The largest IPO of all time in terms of proceeds was the Agricultural Bank of China, which raised $22 billion in its 2010 offering, according to data from Thomson Reuters.

The largest U.S.-listed IPO of all time was Visa, which raised $19.6 billion in 2008. 

For comparison's sake (and as a reminder of how times have changed), Amazon's IPO filing in 1997 attempted to raise just $33 million. Of course, the company at that point was still just an online bookstore. 

Over the coming weeks Alibaba will disclose more information about its financials and operations. Until then it's too soon to know if Alibaba is a worthy investment, or if it will raise enough cash to make history. Stay tuned.

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Jay Jenkins has no position in any stocks mentioned. The Motley Fool recommends, Facebook, and Visa. The Motley Fool owns shares of, Facebook, and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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