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Get Ready for Alibaba's IPO


It's all very exciting. Too exciting for the individual investor.

The jungle drumbeat of the Internet has lately been sending the signal that Alibaba, owned in part by Yahoo (NASDAQ:YHOO), will file the paperwork for its initial public offering any minute now.
Lending credence to the rumor is the relentless blizzard of announcements of new projects and acquisitions coming from the Chinese e-commerce giant.
It is unlikely that any of these acquisitions will be included in the IPO, but even without them, the Alibaba launch is expected to raise more money than the Facebook (NASDAQ:FB) public debut two years ago.
Earlier this month, Alibaba's valuation was raised to $168 billion, from $153 billion in February, based on the average estimate of 12 analysts compiled by Bloomberg News.

The IPO is expected to sell a total 12% of Alibaba shares, making it a $20 billion deal. Facebook raised $16 billion in its IPO.
The raised expectations followed reports of record sales and earnings by Alibaba in the quarter that ended in December 2013. Revenue rose 66% to more than $3 billion while profit more than doubled, to $1.35 billion, in those three months.
As a privately held company, Alibaba does not release sales figures. The numbers are based on quarterly reports from Yahoo, which owns 24% of the Chinese company.
Alibaba makes most of its money from commissions and advertising placements in its vast marketplaces, which include the flagship as well as TaoBao and Tmall.
The company, founded in 1999 by one-time English teacher Jack Ma, has been described as a cross between Amazon (NASDAQ:AMZN) and eBay (NASDAQ:EBAY).
That description probably never was entirely accurate, but it's getting less so every day given Alibaba's relentless acquisitions drive.
On Monday, Alibaba announced a joint venture with UCWeb to launch a mobile search engine. UCWeb operates a mobile browser that currently has 500 million users.
Alibaba also said  Monday that it had purchased a 16.5% stake in a popular Chinese Internet video site called Youku Tudou. The deal  was estimated by Variety to cost Alibaba $1.22 billion.
Over the past few weeks, the company revealed that it has invested in the messaging app TagoMe and the ride-sharing service Lyft.  It paid more than $800 million for a controlling stake in ChinaVision, a producer of movies and television programs. And, it spent $215 million to buy Tango, a Silicon Valley-based mobile messaging service.
Of course, not all of this action is about impressing Wall Street. It's mostly about competing in China, where, despite its massive size and reach, Alibaba has some serious competition on the Internet from Tencent Holdings and Baidu (NASDAQ:BIDU), among others.
Just how massive is Alibaba? Well, it is said to be responsible for 2% of Chinese GDP already.
As an analysis in McKinsey Quarterly made clear a year ago, Alibaba could only have happened in China.
In China, the report concludes, e-commerce isn't changing the consumer marketplace, it's creating it. Villagers leading small business enterprises have leaped straight into the big-time. Consumers who have never seen a chain store can click to buy anything they want. For the first time, people in remote areas can get the same stuff that residents of Beijing have.
That's all very intriguing but, to the individual American investor, the Alibaba IPO is by no means a no-brainer.  It seems likely that most of those shares of Alibaba will wind up in the hands of institutional investors.

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No positions in stocks mentioned.
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