Everything about Alibaba’s recent announcement to make an initial public offering (IPO) in the United States is outsized. Estimates of the initial valuation are huge (in the 120-250 billion dollar range). Alibaba is the largest, most diverse company, in the fastest growing industry (e-commerce) with the most populous country (China) on the planet.
The risks to investors are monumental, too. Due to Chinese laws prohibiting foreign ownership of internet businesses, the offering is structured via a “variable interest entity” (VIE). By this structure, investors purchase shares of a holding company set up in the Cayman Islands with interests in the Chinese Alibaba. Law on the validity of such an arrangement is unsettled, and Jack Ma, founder of Alibaba, has a history of using the law and structure to justify a bait and switch maneuver with investors. Finally corporate governance is an issue as founder Jack Ma and other senior executives will have the power to name a majority of the board.
To learn more about this “Sale of the Century” and other IPOs, check out these resources.
For nice overviews from different perspectives of the initial-public-offering process, see EY’s Guide to Going Public or The IPO Decision: Why and How Companies Go Public or Examining the IPO Process: Is it Working for Ordinary Investors.
EDGAR Company Filings To get registration statements, often called the prospectus (S-1 for domestic or F-1 for foreign) filed with the Securities and Exchange Commission, search by company name.
Hoover’s IPO Central , Yahoo’s Recent IPO News , Renaissance Capital IPO Center, PWC Capital Markets Weekly and Investor Business Daily IPO Analysis are great for keeping abreast of IPO announcements.
For a more academic take on going public, search journals such as Journal of Financial Economics, Journal of Finance and Journal of Corporate Finance, Journal of Banking Finance, and Applied Financial Economics as these frequently publish studies on initial public offerings.
SDC, Bloomberg terminals and Morningstar Direct—available in the Applied Finance Lab—provide structured data relevant to the study of IPOs.
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