Alibaba Group Holding Ltd.’s international online shopping unit is mulling an initial public offering in the United States, according to a report by Bloomberg. The move comes at a time the e-commerce unit is weighing options to improve business growth opportunities encompassing related brands like AliExpress and Lazada.
Alibaba International Shopping Unit IPO Expected in 2024
Since the plan is in its initial stages of consideration, the company has yet to determine the IPO size, as the information from people familiar with the matter.
However, one of the sources who requested not to be named as the manner was still private confirmed that the business group has started consulting banks that will help steer the ship in this direction, with the IPO expected in 2024.
Investors appeared to have welcomed the news, with Alibaba’s US-listed shares up 1.24% at market close on May 4. The shares were trading 0.38% up after hours, according to Yahoo Finance.
The international shopping limit finds itself in direct competition with the likes of Amazon.com Inc. in markets outside China and is one of the six entities Alibaba is planning to split into.
While valuations for international business are available, they vary. For instance, in March, Morgan Stanley valued “international retail” units at $29 billion. This included businesses such as Lazada and Treddyol.
Another valuation was released in the same month by CICC valuation of Alibaba’s international division approximately $39 billion.
Nevertheless, fears of a recession in most of Alibaba’s international markets have seen growth become very volatile in recent quarters. Catherine Lim and Trini Tan, analysts at Bloomberg Intelligence valued the business at $19 billion, as long it focuses on cutting costs.
Why A US Listing?
Alibaba is planning two other IPOs in Hong Kong for Cainiao Network Technology and Freshippo, among the firm’s six business units. The company announced in March that it was going to split into six independent business units in a move meant to improve organizational efficiency and agility.
The consideration for a US listing is intriguing in several ways. First, it would allow the unit to naturally inherit the name, Alibaba International Digital Commerce Group (IDCG). This is essential to allow access to investors who may be cautious about China as global geopolitics tension keeps shifting.
There have been reports of Shein, a China-based fashion startup considering a US IPO in the coming year.
The timing of the US IPO is also an interesting factor, considering the market in the United States has been relatively inactive for a year now with little to no signs of any kind of thaw.
Stripe for instance is sitting on its plan to go public, including companies like Instacart and Navan (previously TripActions) with no signs of those plans coming into action in the near term. Moreover, some investors believe that the IPO market may stay in its dormant state for another year.
On Thursday, Kenvue, a subsidiary of Johnson & Johnson, made its debut with the largest initial public offering since Rivian’s late-2021 listing.
Simultaneously, it was revealed that the $9.5 billion-valued marketing software firm Klaviyo is considering an IPO after appointing two new board members.
According to a previous report, the company has already engaged bankers to facilitate the offering.
Breaking Up Alibaba – What It Means
Alibaba intends to break up into six separate independent units as earlier mentioned. Each unit will have the freedom to raise funds, with IPO as an option at the appropriate time. Alibaba’s CEO Daniel Zhang confirmed this decision but declines to provide a specific IPO target for any of the units.
IDCG encompasses Southeast Asian online marketplace Lazada, AliExpress, which is popular in Russia, Latin America, and parts of Europe, Trendyol in Turkey, Daraz in South Asia, and the B2B platform Alibaba.com.
In the last quarter of 2022, these platforms experienced a 3% growth in combined orders from the previous year, with Trendyol leading the surge. IDCG contributed approximately $9.5 billion, or 7%, of Alibaba’s revenue in the previous fiscal year, and is overseen by Jiang Fan, who previously headed Alibaba’s domestic online retail businesses, Taobao and Tmall.
Various segments of Alibaba’s conglomerate have initiated spinoff procedures. For instance, Alibaba’s logistics subsidiary, Cainiao Network Technology Co., as well as its supermarket chain, Freshippo, have already commenced IPO preparations with banks in Hong Kong as mentioned earlier.
Although discussions surrounding a potential IPO are still in their early stages and the circumstances could change, IDCG confirmed to Bloomberg that no IPO plans are currently in place.
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