Sep 19, 2014

What does Alibaba offer that makes the company so valuable?

There has been a lot of talk about Alibaba’s upcoming IPO, and how it could be huge. I’ve barely heard of Alibaba. What does the company offer that makes it more valuable than other companies?

Alibaba Group

"Alibaba Group Holding Limited (NYSE: BABA) is a publicly traded Hangzhou-based group of Internet-based e-commerce businesses, including business-to-business online web portals, online retail and payment services, a shopping search engine and data-centric cloud computing services. In 2012, two of Alibaba’s portals handled 1.1 trillion yuan ($170 billion) in sales[3] The company primarily operates in the People’s Republic of China (PRC), and at closing time, on the date of its historic initial public offering (IPO), 19 September 2014, Alibaba's market value was measured as US$231 billion.[4]

In September 2013, the company sought an IPO in the United States after a deal could not be reached with Hong Kong regulators.[5] Planning occurred over 12 months before the company's market debut in September 2014. The Alibaba ticker symbol is "BABA.N", while the pricing of the IPO initially raised US$21.8 billion,[6][4] which later increased to US$25 billion, making it the largest IPO in history.[7]

Alibaba's consumer-to-consumer portal Taobao, similar to eBay, features nearly a billion products and is one of the 20 most-visited websites globally. The Group's websites accounted for over 60% of the parcels delivered in China by March 2013,[3] and 80% of the nation's online sales by September 2014.[4] Alipay, an online payment escrow service, accounts for roughly half of all online payment transactions within China.[8]"

Just because Americans don’t know a lot about it doesn't mean that Alibaba isn’t a big deal. It’s an interesting company that was formed by an interesting individual. They are a huge e-commerce company somewhat like a Groupon/ebay hybrid that runs the 3 largest e-commerce sites in China, which is one of the largest and fastest growing markets in the world. Last year, Alibaba’s sales increased by 55% to over $8 billion, with profits up 132% to just over $4 billion. Those are significant numbers for any company. Plus, because the Chinese market is not fully developed, there is huge growth potential for the company. 

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