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5 Questions About the Alibaba IPO You've Been Too Embarrassed to Ask

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The Chinese company could raise as much as $20 billion when it holds its IPO in the US, but many Americans are still wondering what the company is all about.

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Though the sheer volume of media coverage about Alibaba is a clear indicator that there's something significant behind this company and its recent IPO filing, you might still be scratching your head to figure out what all the buzz is really about. Why should average investors care about Alibaba, and why do some analysts expect its IPO will raise as much as $20 billion? (For comparison, Facebook (NASDAQ:FB), the largest tech IPO to date, raised $16 billion two years ago.)

We've got the answers to five common -- and completely understandable -- questions you might have about the Alibaba IPO but are too embarrassed to ask.

What Is Alibaba?

Alibaba Group Holding Ltd. is a China-based company that holds several large and small companies under its corporate umbrella. Two of its most notable businesses are the online shopping sites Taobao and Tmall, from which it also generates significant advertising revenue. Similar to eBay (NASDAQ:EBAY) or Amazon (NASDAQ:AMZN), Taobao primarily features thousands of products sold by smaller merchants, while Tmall sells brand-name products. By way of these sites, Alibaba holds an 80% share in the Chinese e-commerce market. Alibaba also recently acquired a stake in Youku Tudou (NYSE:YOKU) -- an online business similar to YouTube and Netflix (NASDAQ:NFLX) -- and owns the group-buying marketplace Juhuasuan, a site that offers daily deals. 

Though not held under the Alibaba Group Holding umbrella and not part of the pending IPO, Alibaba's top execs also control Alipay, the world's number-one processor of mobile payments. Beyond serving as the main source of buying and selling "currency" on Alibaba's e-commerce platforms, users in Asia have come to rely on Alipay as a mobile-commerce "wallet" of sorts -- a technology that Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), and other mobile-wallet innovators have failed to make catch on with any significance in the United States. Though not part of the IPO, Alipay's relationship to Alibaba "could drum up investor interest in the offering and soothe concerns about a conflict of interest for Alibaba's management," the Wall Street Journal reports.

Why Is It Worth So Much?

Not only do 42% of all Internet users reside in Asia, The Next Web recently reported the findings of a MasterCard (NYSE:MA) survey indicating that two-thirds of consumers in the Asian region go online to shop; nearly 100% of respondents from China made an online purchase in the last three months. With those types of figures, it's hardly surprising that e-commerce spending in Asia is estimated to reach more than $525 billion by the end of this year, steadily increasing to a staggering $1,052 billion in 2017, according to data compiled by the site Tech in Asia. Alibaba essentially controls this e-commerce market.

For comparison, Internet Retailer reports that Amazon is valued at nearly $137 billion based on today's share price, while eBay is valued at about $64.5 billion. Alibaba was more profitable than either Amazon or eBay in 2013, despite lower revenue.

So far, Alibaba hasn't announced any plans to try and attract US shoppers and has said that the Chinese market still has room to grow. 

Can the Average Person Invest? 

Though it's still unclear whether Alibaba will trade on the New York Stock Exchange or the Nasdaq, the average investor will be shut out from the action until the day the stock goes public. (For more on investing in the company, see "Alibaba: For Mom and Pop Investors, the Hidden Risks Are Real.")

Are There Indirect Ways to Profit From the Alibaba IPO?

If you already own stock in Yahoo (NASDAQ:YHOO), you could benefit from this IPO without lifting a finger: It owns 22.6% of Alibaba and will likely benefit handsomely from the IPO. Similarly, Japan's SoftBank (OTCMKTS:SFTBF) owns an even larger stake (about 37%) in Alibaba, making it the top shareholder. The higher the IPO price, the more either of these stocks (and their shareholders) stand to potentially benefit. That said, because other business matters will impact the individual stock performance of either of these companies, just how much bearing Alibaba's IPO will deliver for investors in them remains to be seen.
 
Who Is Alibaba's founder, Jack Ma, Anyway? And Who Is Alibaba's CEO?

The founder of Alibaba, 49-year-old former English teacher Jack Ma, remains an active executive chairman at Alibaba, though he stepped down as chief executive last May. The New York Times reports that Ma, a superstar in the Chinese business world, claims to have no real technology understanding and left his teaching job in 1995 after having first used the Internet to conduct a search for "beer" and "China" -- only to find no results. Recognizing opportunity from that experience, he started one of China's first Internet companies, and in 1999 he started Alibaba. He's reportedly a brilliant strategist, philanthropist, dogged competitor (particularly in battles waged over the years with companies such as eBay and Yahoo), and a motivating leader with a mind for recognizing how existing ideas and ways of doing things can be improved upon. 

The current CEO of Alibaba is Jonathan Lu, a former operations manager at the company who's said to shun the limelight. In fact, as of this writing, he doesn't even have a Wikipedia page. 

Twitter: @WellnessOnLess

More tech stories:

Apple's Retail Business Is Growing Fast (Online and Off), but Google's Android Is Taking the First-Time Buyer Market

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