We’ve got a timeline.
According to a report in The Wall Street Journal, Chinese Internet company Alibaba expects to launch its much-anticipated IPO process at the end of July, which means BABA stock could start trading on the New York Stock Exchange by mid-August.
Analysts expect the Alibaba IPO to raise more than $20 billion, which would make the deal the largest in history, and investors large and small are clamoring to get in on this offering.
Which means if you are, too, you’d better do your homework.
One of the best things to do to bone up on your Alibaba intel is to dive into the Alibaba IPO prospectus — for foreign companies such as Alibaba, this is called the F-1, while it’s called the S-1 for domestic operators.
The Alibaba F-1 is more than 350 pages long. It’s got technical and legal jargon. It’s boring.
But there are a few sections that could prove key in an investor’s decision to buy BABA stock, so let’s take a look together at these important areas.
Alibaba IPO Factor #1: The Business (Pages 1 to 9)
“The Business” is the first section I go to when looking at a prospectus, and I read the whole thing. It’s going to be shed in a positive light, but it still does provide a good overview of the company and its business model.
In the case of the Alibaba IPO prospectus, the focus is broad:
“Our mission is to make it easy to do business anywhere.”
To this end, Alibaba has built various online and mobile marketplaces like Taobao Marketplace (China’s largest online shopping destination), Tmall (China’s largest third-party platform for brands and retailers) and Juhuasuan (China’s most popular group buying marketplace by its monthly active users). Alibaba has also expanded into adjacent businesses like cloud computing and online payments (Alipay).
The Alibaba IPO prospectus also goes into detail on the market opportunity, which is massive. According to a report from nonprofit research organization CNNIC, China had 302 million online shoppers compared to a total Internet population of 618 million. However, mobile is likely to be the main way these users will start to use e-commerce, so Alibaba has been pumping up its mobile efforts, such as the recent purchase of UCWeb as well as investments in Weibo (WB) and messaging service TangoMe.
Finally, the Alibaba IPO prospectus does a good job in arguing why the company has a strong moat — that is, with its “network effects.” This is a powerful aspect of a successful online marketplace since the more buyers and sellers there are, the more valuable it becomes. It’s why companies like eBay (EBAY) have been dominant for such a long period of time.
Alibaba IPO Factor #2: The Financials (Pages 16 to 17):
Here you will find a chart of the income statement, which shows the revenues, costs and profits. You’ll see that Alibaba is growing quickly and is generating substantial amounts of cash.