Business
3:01 am
Mon March 17, 2014

Chinese Tech Giant Alibaba Plans To Launch IPO In U.S.

Originally published on Mon March 17, 2014 9:59 am

Transcript

RENEE MONTAGNE, HOST:

And the Chinese Internet giant Alibaba says it plans to launch an initial public offering in the United States. Alibaba is known as the Chinese Google. and the IPO could be one of the biggest offerings in the history of the technology sector.

As NPR's Jim Zarroli reports, buying shares in the company brings some risk.

JIM ZARROLI, BYLINE: Alibaba had been weighing whether to launch its IPO in Hong Kong or the United States. This weekend, it announced it had decided on the U.S. It didn't provide anymore details about when the IPO will take place. It was good news for big Wall Street banks, which stand to earn many millions of dollars in fees. And investors could line up around the block to buy shares.

Jay Ritter is a professor of finance at the University of Florida.

JAY RITTER: Current speculation is it might be as big as Facebook, roughly $16 billion.

ZARROLI: Alibaba has a huge part of the search market in China, and though it faces growing competition within the country, it remains a major player in e-commerce.

RITTER: It's benefitting from the same trend that's going on in the United States, where online shopping is gaining market share and traditional bricks and mortar retailers are getting hammered.

ZARROLI: One reason that Google Alibaba has grown so big is the history of animosity between the Chinese government and Google, says technology analyst Rob Enderle.

ROB ENDERLE: Alibaba is the government-approved Internet giant, so that's probably why they've been so much more successful than Google is. They're not fighting the Chinese government.

ZARROLI: Enderle says as a search engine, Alibaba is much more politically correct than Google. You can't use it to find too many articles criticizing the government. Still, Alibaba's position has helped the company flourish and gotten the attention of investors.

ENDERLE: If you've got the ability to beat Google in any major market - and China is a major market - that gives you a lot of power.

ZARROLI: But Alibaba has had trouble expanding much beyond China itself and it wants to change that. Jay Ritter of the University of Florida says that's probably the reason why it decided to do its IPO in the United States.

RITTER: In Alibaba's case, I think it's mainly a matter of taking advantage of U.S. investor enthusiasm for Internet-related companies.

ZARROLI: Ritter says there are risks to investing in Alibaba. It has sometimes clashed with some of its major investors among them Yahoo.

Rob Enderle says the prospect of tensions between China and the U.S. could interfere with Alibaba's expansion plans.

ENDERLE: Clearly, any major dispute between China and the U.S. could have an adverse impact on any Chinese company, particularly one that's operating with the idea that it's going to move against Google outside of China.

ZARROLI: But the Chinese Internet market has grown so big and has such potential that a lot of investors could find the prospect of buying its shares almost irresistible.

Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.