On Friday, Chinese e-commerce giant Alibaba Group Holding unveiled plans for an initial public offering that values the company at US$155 billion, which would instantly make it one of the largest listed in the US and mark one of the biggest stock-market debuts ever.

Singapore company SingPost is now linked to the e-commerce giant after the latter’s 10% stake of SingPost three months ago in June, making Alibaba its second largest shareholder. Both companies are also looking at an e-commerce logistics venture, allowing SingPost to benefit from Alibaba’s network and platform. Hence, SingPost investors have their eyes on Alibaba’s IPO, which may be a catalyst for share price moves in SingPost shares.

Alibaba could be world’s largest IPO
In a regulatory filing on 5 September 2014, China's dominant e-commerce player, Alibaba valued itself at US$155bn, just below rival Amazon’s US$160bn market capitalisation. Alibaba is a collection of various online marketplaces for consumers and businesses that makes its money primarily by charging advertising fees to merchants that are promoting themselves in its chaotic online bazaars that have 279 million active buyers and 8.5 million active sellers.

The company’s stockholders -- including Yahoo!, which owns more than 22% of the company, Chairman Jack Ma and Vice Chairman Joe Tsai – are planning to sell 320.1mn American depositary shares for US$60 to US$66 apiece. This will raise as much as US$21bn, beating Visa’s US$19.7bn IPO in 2008, the largest US IPO to date. Including an overallotment option that will allow Alibaba to raise as much as US$24.3bn, the IPO listing may also potentially surpass the existing global record held by Agricultural Bank of China, which raised $22.1 billion in sales in both Hong Kong and Shanghai in 2010.

Alibaba kicked off their roadshow in New York yesterday, a process which allows the company to officially introduce itself to investors. The IPO shares are then expected to begin trading the following week.

According to the Wall Street Journal, Alibaba’s offering has ignited excitement among some analysts and investors, who see in it an entree to China's exploding consumer market. Alibaba is far more profitable than many of its American Internet counterparts, generating 43% operating profit margins in the second quarter of 2014. Amazon broke even in that period—a 0% operating margin. The offering also takes advantage of an IPO market that has been the busiest in years, boosted by rising share prices and investors demand for risk at a time when interest rates are extremely low.

SingPost to receive boost on Alibaba’s IPO listing?
In Singapore, SingPost shares had in June rallied to a record high of $1.775 after Alibaba announced their US$249mn acquisition of the Singapore postal service. Apart from the acquisition, both companies also announced that they are looking at an e-commerce logistics venture, allowing SingPost to benefit from Alibaba’s network and platform.

SIngPost shares are currently just 1.4% below its record close on $1.775 and it remains to be seen if Alibaba’s IPO listing in potentially a week’s time may lead to moves in SingPost shares.

Source: Macquarie Research - 9 Sep 2014