Oct. 22, 2013 at 12:31 PM ET
Twitter's management team goes on the road Friday to promote its highly anticipated Nov. 15 listing on the New York Stock Exchange. But the 8-year-old Internet messaging company's Initial Public Offering is already being overshadowed by a bigger public offering that hasn't been formally announced.
Sometime after Twitter's moment in the Wall Street spotlight, it's expected billionaire Jack Ma will step to the podium in New York to ring the bell heralding his Alibaba Group Holding's listing in New York, the biggest U.S. IPO for a Chinese technology company, and one that dwarfs Twitter in size, revenue—and significance.
"Alibaba is a one-time thing," said Benjamin Joffe, an angel investor and founder of Asia-focused consultancy Plus8Star in Beijing. "How often do you list a $100 billion company?"
Alibaba, an e-commerce platform in mainland China that includes features of Amazon, eBay and hosting sites for small businesses, could reach revenue of $5 billion this year and $1 billion in profits. Alibaba CEO Jonathan Lu said recently the company expects to triple the volume of transactions on its marketplaces to about 3 trillion yuan ($490 billion) by 2016, overtaking Wal-Mart as the world's biggest retail network. Analysts have estimated it will raise $10 billion to $15 billion in its IPO that should happen in the first quarter of next year and value Alibaba at as much as $100 billion. That would make it the biggest IPO since Facebook's debut last year.
By contrast, Twitter is looking to raise $1 billion at a valuation of $10 billion to $15 billion. Twitter's first disclosure on the way to an IPO reported $422 million in revenue through Sept. 30, up 106 percent—and a net loss of $134 million, also up 89 percent.
Alibaba's IPO will be the culmination of a fierce behind-the-scenes battle among the world's stock markets for the right to take the Chinese e-commerce giant public. Whether Alibaba goes with the New York Stock Exchange or Nasdaq, stock markets in London and Hong Kong will lose out on an IPO that could deliver millions of dollars in fees to bankers, brokers, and attorneys. "It's a pretty competitive landscape out there," conceded Alistair Walmsley, head of primary markets at the London Stock Exchange Group, which has not been in the running for the Alibaba listing.
But New York may get the coveted prize. Alibaba decided not to go with the Hong Kong Stock Exchange after it rejected the Internet company's unusual governance structure, which would keep management control of the company in the hands of a minority of 28 founders and shareholders. "Our overarching objective is to maintain our culture," Alibaba Executive Vice Chairman Joseph Tsai wrote in a recent blog posting.
"Alibaba's decision to turn outside of Asia is notable," said Benny Pang, managing partner of the Hong Kong office of Loeb & Loeb, an international law firm long involved with Chinese IPOs. "For a Chinese company to go offshore, the first choice is going to be Hong Kong," he noted, because of language issues, compliance costs and proximity.
Pang admits a listing in New York would give Alibaba a lot of visibility. "A major attraction for the Chinese Internet giant is the robust U.S. market, and the sheer size and depth of the U.S. exchanges," noted Kathleen Smith, principal of Renaissance Capital, an international IPO market research firm.
In the first three quarters of 2013, companies raised $36.5 billion in 104 deals on New York Euronext. By contrast, Nasdaq OMX trailed with $11.3 billion in 87 IPOs. Hot on its heels was the London Stock Exchange and its smaller-cap AIM market, where 64 companies raised $7.85 billion. It was followed by the Hong Kong exchange, where companies raised $7.5 billion in IPOs in the first nine months of this year, up 30 percent from the same period in 2012.
In the Big Apple, it's yet to be seen if the NYSE will sweep its archrival. This month it scored a big win when Twitter announced it would list on its exchange instead of Nasdaq, the traditional home of tech start-ups. Tech companies have cooled on Nasdaq since the botched launch of Facebook last year. In May, the Securities and Exchange Commission fined that exchange $10 million for bungling the social network's stock offering. Just three months later, another technical glitch halted Nasdaq trading.
So far, Alibaba has been silent on any plans to go public. A spokesman for the company told CNBC that no underwriters have been hired, and that no listing location has been chosen.
Alibaba's IPO is an important breakthrough for Chinese companies, which have been shunned by foreign investors since a series of accounting scandals broke in 2010. "Up to 2010, everybody wanted them," said attorney Mitchell Nussbaum, head of capital markets and Asia for Loeb & Loeb. "It went cold on them very, very quickly." But Alibaba's association with Yahoo, which holds 24 percent of its shares, has given the e-commerce giant transparency that many other Chinese companies can only envy.
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