China’s largest ecommerce company has valued itself at $130 billion in preparation for its highly anticipated initial public offering. However, the company’s actual valuation is likely to be much higher when it finally goes public on the NYSE.

Alibaba filed a manuscript with the United States Securities and Exchange Commission on Friday that increased its valuation of a share in the Chinese ecommerce company from $50 to $56. Given that the company stated that there would be 2,327, 539, 776 shares availble to be traded publicly, the valuation of the company would be pushed from $116 billion to $130 billion.

However, looking at Alibaba’s past performance and future prospects, the $56 per share valuation seems on the mild side. According to analyst RJ Hottovy, Alibaba’s valuation would climb to $220 billion after it releases its IPO in the next few months.

At the current $130 billion valuation, the Chinese site would be worth more than eBay Inc. (NASDAQ: EBAY). At Hottovy’s $220 billion valuation, the company would be worth more than Amazon.com Inc (NASDAQ: AMZN), which is valued at $163 billion, and Facebook Inc. (NASDAQ: FB), which is worth $174 billion.

What Makes Alibaba So Promising and Unique

A key factor that could further increase Alibaba’s valuation is its affiliation with Alipay. Back in 2011 the company separated itself from Alipay due to pressure from the government, who claimed that Alipay threatened government owned banks. Now, sources say that Alibaba plans to reclaim Alipay – but chances of that happening before its IPO are slim.

Additionally, Alibaba’s company structure is unique in that it can expand its board members without approval from all its shareholders. Alibaba operates as a partnership, with a share class structure between one, dual, and multiple class structures. As a result, the majority control of the company belongs to 27 individuals. This partnership model enables the company to assign most of the board members, who are then voted for by all the shareholders.

Sources also revealed that the document filed with the SEC last week could mean that the company could appoint more members to the board in order to get a majority. Currently, Alibaba has 9 board members, 4 of which were appointed by the company. Thus, this amendment gives the company the authority to add 2 additional board members after the company’s IPO.

So far, Alibaba is passing all of the SEC’s IPO processes without a hitch. A congressional report released earlier stated that Chinese companies would have to go through a stricter regimen to release an IPO in the United States. According the analyst Leslie Pickler, the smooth processing of Alibaba’s IPO shows that the company has thoroughly satisfied the rigorous requirements of the SEC.

Alibaba states that its ecommerce platform makes it the biggest online and mobile retail company in terms of merchandise volume. The total amount of money from purchases on its three Chinese ecommerce sites totaled to $270 billion. Alibaba now controls 80% market share of online retail sales in China. Alibab’s retail sites serve over 255 million buyers and 8 million sellers.

The three sites in China that Alibaba serves are Taobao, Tmall, and Juhuasuan.

This fiscal year, Alibaba brought in $3.77 billion in net income – a 170% increase from the last fiscal year, $8.45 billion.

 

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