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Alibaba IPO Could Be the Biggest U.S. Deal Since Facebook

The Chinese e-commerce site is trying to avoid certain regulations


The Twitter IPO might not be the only high-profile deal to hit the markets in the next few months. According to new reports, it looks like the Alibaba IPO could land in the U.S. as well.

According to Bloomberg, such a move wouldn’t be about liquidity, but as a way to benefit from less onerous regulation compared to the Chinese markets.

The Alibaba IPO, which operates a massive e-commerce platform, would be a much larger deal than Twitter. While the Twitter IPO is expected to fetch a market value of about $15 billion or so, the Alibaba IPO has an estimated valuation of more than $100 billion — more on par with the enormous Facebook (FB) deal of $104 billion.

That should mean a big one-time payout for Yahoo (YHOO), which owns a juicy 24% stake in Alibaba.

According to Bloomberg, it seems Alibaba would have preferred to have listed on the Hong Kong stock market, but the company’s management team wanted to create a structure that gives 28 partners — who own only about 10% of the company — the right to control the majority of board member nominations. The rationale is that it would allow the company to make long-term decisions “without worrying about being pushed out by an activist investor with a different strategy.”

The problem: The Hong Kong exchange prohibits these kinds of powers.

The solution: List in the U.S., where that’s not an issue. As seen with companies like Google (GOOG) and Facebook, it’s OK to have dual classes of stock that have different voting rights.

As for the Alibaba IPO itself, it’s still in the early stages. Alibaba has not yet selected lead bankers or an exchange, so don’t expect a deal to hit the market until at least the first quarter of 2014.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll 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.

Article printed from InvestorPlace Media,

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