Alibaba's recent investments in U.S. e-commerce sites have possibly been aimed at brand-building for a U.S. IPO. (Shutterstock)
Alibaba is already the world's largest e-commerce company, but that's clearly only the beginning for the Chinese tech behemoth. According to a Financial Times story today, the company will most likely be announcing its initial public offering (IPO) on New York’s stock exchange rather than Hong Kong—a move which shows the company's drive to become a truly global business.
Citing unnamed sources, the report states:
Alibaba is “95 per cent certain” to choose New York over Hong Kong for its initial public offering, expected to be one of the largest in history, according to people close to the process.
The company is no longer “even engaged” with the Hong Kong exchange, according to one person familiar with the matter, while another said a New York listing was now “95 per cent certain”. A third person familiar with the situation said: “I can categorically tell you that Alibaba will not list in Hong Kong.”
Alibaba, which runs lucrative e-tail sites Taobao and Tmall, reigns as China’s e-commerce market leader in both the B2C and C2C spheres. Amidst IPO talk, the company has been making a wave of acquisitions—not just of Chinese companies, like its recent majority stake in ChinaVision Media Group—but has also been eyeing the U.S. market. Luxury and lifestyle are playing a role in its U.S. acquisitions: in January, the company invested in U.S. vintage luxury e-commerce site 1stdibs, and plans to launch a U.S. lifestyle e-commerce site called 11 Main.
If the U.S. IPO happens, it could be the biggest in the United States—estimates “have varied” but “are in the region of $120 billion,” says Financial Times. The main reason behind its U.S. acquisitions is likely to help build brand awareness in the United States, since the company's "world's largest" status stems mainly from the sheer size of the China market at the moment. According to an article on ZDNet:
So why is it targeting the U.S. market, and not Asia, which would make a more logical first step toward achieving its globalization plan? The answer may lie in its highly anticipated IPO (Initial Public offering).
It offers the company a great opportunity to drive global brand awareness in the lead up to its public offering, Willis suggested. "They want to be a global brand and you can't be one without a strong presence in the U.S." she said. "I think having a presence in U.S. will give them more traction and coverage, and this will help drive their IPO price."
Meanwhile, competitor Tencent is clearly hoping to amp up e-commerce competition against the giant—the owner of the massively popular mobile messaging app WeChat just announced its purchase of a 15 percent stake in China’s number two e-tailer, Jingdong. Both companies have also been in competition in the social media and e-payment spheres: Alibaba has invested in Sina Weibo to compete with WeChat, while WeChat recently created a new payment system to compete with Alipay.