E-mail
del.icio.us
Technorati
DiggWhy all the bleating in the headlines Tuesday over the pricing of Alibaba.com's planned $1.5 billion IPO? The concept of supply and demand is covered on the first day of Econ 101, so even your average college stoner knows that the price of a good, or in this case a share of stock, is a function of the quantity supplied by producers and demanded by consumers (or investors).
In brief, the controversy is overblown. Shares in Alibaba, China's leading business-to-business e-commerce company, expects to price shares between HK$12 and HK$13 ($1.55 and $1.68), which critics say equates to an "astronomical" price to earnings ratio of 94.5 to 106.3 times the Internet company's 2007 earnings. Duly noted. But investors in Chinese companies today are less focused on a company's current financial performance than on its future revenues and profit as gazillions of Chinese people go online.
Another ostensible concern with the IPO, the thinking goes, is that Alibaba's p-e at the proposed offer price is even higher than the 90 p-e Google Inc. (GOOG) shares sported when the company went public in 2004. And yet if we knew then what we know now about Google, the shares would certainly have been priced much higher than the $85 they went out at. Recall that when Google went public it actually lowered the size and price of its IPO because of demand uncertainty.
Alibaba founder Jack Ma is spot on in defending the price, telling reporters that "investors who had missed out on Google's IPO don't want to miss out on Alibaba's."
Rebecca Fannin, a former Tech Confidential contributor, Red Herring reporter and long-time Asia hand who has interviewed Ma several times (here's a shameless plug for her forthcoming book on top Chinese entrepreneurs, including Ma), thinks Alibaba has a bright future as a public company.
See Forbes story on Alibaba
See August 2004 story from TheDeal.com
See Oct. 22 post from Nesheim Online
- Chipmakers Staccato and Artimi to merge, land $20M in VC
- Yahoo!, AOL continue their two-step
- Grand Canyon shares rise as online education company jumps IPO chasm
- The market might taketh away, but HP and LeftHand giveth
- Qteros raises $25M for its plant-eating, ethanol-yielding germ
All the reports from Hong Kong indicate that the IPO is going to be a very profitable deal for both Alibaba and the new shareholders, some 80% of them corporate investors such as the US giants Yahoo!, Cisco Systems, and AIG Investments.
This is all exciting financial stuff, even though the pricing of the IPO is being discussed now, but what the new Alibaba stockholders and the media should also know is this:
Alibaba is not only China's biggest e-commerce firm but also the world's largest online shark fin trader. But the Yahoo! executives don't seem to mind. They already have a US-$ 1 billion stake in Alibaba representing a 40% shareholding, and, as reported, will soon increase their investment in the Chinese internet company by another 8-10%.
Activist groups, thousands of petitioning individuals from all over the world, media organizations have approached both Alibaba and Yahoo! with a view to induce them to drop the shark fin trade. The reaction from them was utterly disappointing. While the Alibaba executives stated that they do not wish to "take sides" in the ongoing "controversy", Yahoo! sheepishly claimed that they are not in a position to interfere with the business policies of corporations in which they don't have a majority shareholding.
The fact of the matter is that both firms do not want to end the highly lucrative trade of shark fins. They blatantly ignore the well-founded conclusion of internationally renowned marine experts that the indiscriminate mass killing of sharks, mostly for their fins - well over 100.000.000 animals per year - is driving many species toward extinction with catastrophic consequences for the biodiversity of the world's oceans.
The practice of 'finning' is not only wasteful but also a most brutal way to slice off the fins from live sharks which are subsequently dumped back into the sea to face an agonizing death.
By offering international shark fin dealers a convenient platform to do business Alibaba / Yahoo! are fueling the often illegal finning of sharks and, thus, actively and recklessly contribute to an environmental disaster they are very well aware of.
Click this link and you will find a passionate letter from Captain Paul Watson, CEO of the Sea Shepherd Society, to Susan Decker, President of Yahoo!
http://www.seashepherd.org/news/media_071004_1_article.html