Alibaba 101: The biggest IPO of all time

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By Matt Egan  @mattmegan5

A new star in the tech world is forming right before our eyes.

Alibaba, the Chinese e-commerce giant, is poised to raise more money in its IPO than Facebook or Visa did. It could generate an eye-popping $24 billion when it begins trading on the New York Stock Exchange — likely at the end of next week.

Few Americans have heard of Alibaba. It’s frequently described as a mix of Amazon.com (AMZN, Tech30), eBay (EBAY, Tech30) and PayPal for China. It doesn’t have much of a presence in the U.S., but it’s starting to expand and now owns stakes in companies including Uber, Lyft and search engine app Quixey.

There are a lot of reasons Wall Street is abuzz about this company, but here’s what you need to know:

1. Alibaba will soon be worth as much as Amazon

Alibaba set the stage last week for an IPO that would value the Chinese company at a whopping $155 billion.

That dwarfs eBay’s $67 billion market valuation and is roughly in line with Amazon’s $160 billion market cap.

Alibaba stock is set to price initially between $60 and $66 a share. If it goes at the high end of that range, it will sport a valuation that is within striking distance of Facebook (FB, Tech30), which went public in 2012 and is currently valued at about $201 billion.

There’s still a long way to go before Alibaba catches the biggest tech stars. Even if it prices higher than $66 a share, it will be well behind Google’s (GOOGL, Tech30) $400 billion and Apple’s (AAPL, Tech30) nearly $600 billion market capitalization.

Still, Alibaba is setting the stage to raise more money than any previous IPO, and that means the company will have a lot of cash on hand to put into research, mergers and purchases of startups around the world.

 

2. Alibaba’s IPO could be the biggest ever

Alibaba’s offering would raise up to $24.3 billion, if you include money going to investors and underwriter banks. That would easily top the previous record-holder among U.S.-listed IPOs: Visa’s (V)$19.7 billion raised in 2008.

That would also break the global record held by the Agricultural Bank of China (ACGBY), which hauled in $22 billion in a 2010 IPO that was dually listed in Hong Kong and Shanghai, according to Dealogic.

3. Alibaba moves a stunning amount of merchandise

The Chinese company calls itself the “largest online and mobile commerce company in the world.”

It bases that call on a common e-commerce metric: Gross merchandise volume. Basically, that’s the value of all the merchandise changing hands on a platform over a given time.

Alibaba generated $248 billion of gross merchandise volume in 2013, towering over Amazon.com’s $116 billion, according to estimates by IDC.

In fact, if you add up the value of goods being exchanged on Alibaba, it’s greater than that of Amazon, eBay, JD.com (JD) and Japanese e-commerce giant Rakuten — combined.

Alibaba’s dominance may even grow as China’s middle class continues to expand.

 

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