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Alibaba clarifies leadership as IPO approaches

First Published Jun 17 2014 10:39AM      Last Updated Jun 17 2014 10:39 am

The Alibaba Group, China’s biggest e-commerce company, is continuing to slowly lift the veil on its operations.

The company disclosed more information about itself Monday, including the names of the 27 men and women who will essentially control its board, as it moves toward one of the most anticipated stock offerings in recent years.

The company also provided additional financial information that potential investors wanted as they tried to better understand how it makes money.

The disclosures, made in an amended prospectus filing, were the latest step by Alibaba on the road to an initial public offering that could raise more than $20 billion, one of the biggest on record.



The new document, which was prepared after feedback from the Securities and Exchange Commission, answers some of the questions that investors and analysts have had since the company first filed for an IPO last month.

Among the most pressing queries: Who are the 27 people who belong to Alibaba’s partnership, a group that will essentially control the market operator through their ability to nominate a majority of directors? According to the prospectus, they are primarily members of the management team, led by Jack Ma, a founder and the company’s executive chairman.

Roughly one-quarter of the team is affiliated with Alibaba through the holding company for its sprawling Internet finance businesses, including the payment processor Alipay. That entity, known as Zhejiang Alibaba E-Commerce, will not be part of the forthcoming IPO.

The amended prospectus also listed all of Alibaba’s directors for the first time, beyond Ma and the executive vice chairman, Joseph C. Tsai. Its independent directors include prominent figures in politics and business: Jerry Yang, a founder of Yahoo; Tung Chee-hwa, the first chief executive of Hong Kong after its transfer from Britain to China; and J. Michael Evans, a former high-ranking Goldman Sachs executive who was once considered a potential candidate to run the Wall Street firm.

The directors’ ties to Alibaba may not assuage investors’ concerns about the company’s corporate governance, which concentrates significant voting control within that 27-member partnership. The company has insisted that the structure will help preserve its corporate culture, and chose to keep it rather than list on Hong Kong’s stock exchange, which insists on a one-share-one-vote principle.

Alibaba also provided updated financial results, disclosing that revenue in the quarter ended March 31 rose 38 percent, to $1.9 billion, from the period a year earlier, while profit rose 31 percent, to nearly $884 million.

"The sales were very strong through the end of March," said Brendan Ahern of KraneShares, which manages an exchange-traded fund that focuses on Chinese Internet stocks. "This company continues to grow - and it is very profitable at that."

Perhaps in response to questions from both investors and the SEC, Alibaba also furnished further information about its two main businesses, the marketplaces Taobao and Tmall.

Taobao, a huge online bazaar that sells a staggeringly wide range of goods, accounts for roughly two-thirds of the value of goods sold on both sites, according to data in the latest filing.

But Tmall, a more streamlined site that offers recognized brands, is growing faster. The value of goods sold on Tmall was up 90 percent in the first quarter of this year, compared with the first quarter of 2013. The growth rate for Taobao was 32 percent.

Tmall’s higher growth rate may help stoke bullish estimates for the company’s profits, since Tmall most likely takes in more revenue than Taobao.

Alibaba, however, still did not break out revenue or income numbers for Taobao or Tmall.

Investors thinking about investing in Alibaba shares are also likely to closely scrutinize the company’s mobile strategy. Facebook’s market debut in 2012 suffered because the company had not yet proved it could earn substantial sums from mobile advertising.

Alibaba at least enters the IPO with something of a financial track record on mobile. In the fourth quarter of last year, it started rolling out mobile advertising, which helped increase its mobile revenue. In the first quarter of 2014, mobile revenue accounted for 12.4 percent of total China commerce revenue, up from just 2.2 percent in 2013’s first quarter.

 

 

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