The big question behind the massive Alibaba IPO has been whether the company will launch in New York. Well, now it looks like things are getting much clearer. According to a report in the Financial Times, a New York deal is 95% certain!
For the most part, it seemed that the Hong Kong exchange would get the listing. However, the exchange has not been willing to bend on its rules to allow the company’s partners to retain voting control (so I guess the 5% chance of a Hong Kong IPO is based on some miracle that the exchange will cave).
But of course, the governance rules are bit looser on the NYSE and NASDAQ, at least in terms of voting. And yes, this is certainly good news. Keep in mind that an Alibaba IPO is expected to be the biggest offering in tech history, with a market cap of more than $150 billion. Consider that Facebook’s (FB) value was about $104 billion at the time of its IPO in May 2012.
The Alibaba IPO will also be a demonstration that New York is still a magnet for foreign-based offerings. Some of the recent deals include 500.com (WBAI), LightInTheBox (LITB) and GW Pharmaceuticals (GWPH).
During the past year, investors have been using Yahoo (YHOO) as a proxy for the Alibaba IPO, as the company has a 24% stake in Alibaba; they’ve also been doing the same with SoftBank (SFTBF), which owns 36.7%. In the past year, YHOO stock has gained an impressive 70%. However, YHOO stock has flagged lately, which is a sign that Wall Street has already factored in the impact of an Alibaba IPO.
Now, Yahoo must show that its turnaround efforts are gaining traction. But so far, there aren’t many signs that things are getting back on track.
So, when might an Alibaba IPO happen? Unfortunately, the timing is still a bit fuzzy. But the buzz suggests that a deal could happen later this year. And even if that doesn’t happen, it seems all but inevitable that a deal will happen in 2015. There are financial incentives for Alibaba to complete a deal by December, due to its contract with Yahoo, which owns 24% of the stock.
In the meantime, investors will get a preview of how investors might react to the Alibaba IPO, thanks to the IPO of JD.com. The company is the No. 2 ecommerce player in China and plans to go public within the next few months.
As a sign of the attractiveness of JD.com, the company snagged a $214.7 million investment last week from Tencent (TCEHY). The company is the largest Internet company in China and owns the wildly popular messaging app, WeChat.
So, while you’re waiting for Alibaba to commit that final 5%, keep an eye on the JD.com IPO.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.