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Alibaba to displace less attractive Stocks

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Less attractive Stocks to be replaced by BABA as the IPO looms

It is exactly a week to the U.S. Labour Day, after which Alibaba IPO preparations kicks off. Already plans are underway with investors and fund managers looking for stocks to get rid of to create room for BABA.

Alibaba Group Holdings is a Chinese e-commerce giant, based in Hangzhou – the Capital city of Zhejiang Province Eastern China. The company is set to go public in an initial public offering that could value the company among the 8-thousand pound gorillas of the stock market. Its IPO is expected to top Facebook Inc.’s (NASDAQ: FB) $16 billion offering and become the largest technology company IPO in history.

Alibaba’s presence in the U.S. stock markets will trigger sale of some stocks investors and fund managers deem less attractive. So which stocks may soon be offloaded from investors’ portfolios?

E-commerce Stocks

Alibaba is an e-commerce company controlling over 80% of China’s online market. The company handles more trade volume globally than any other company in the industry. It has an operating margin of 47.5%, which dwarfs its peers such as Amazon.com (NASDAQ: AMZN) and eBay Inc. (NASDAQ: EBAY) with 20% and 0.8% respectively (Thomson Reuters). Here are some of the stocks that analysts say may be affected by upcoming debut of Alibaba:

NASDAQ: AMZN

attractive stocks, alibaba, IPO. amzn, ebayAmazon has continued to be less attractive to Wall Street owing to its recent investment overtures that have weighed down its profitability. Its share price has already lost over 15% of its value this year alone.

While Amazon’s revenue stood at $74.4 billion compared to Alibaba’s $8.4 billion, the Chinese giant is much profitable since it does not stock its own inventory that culminates to fewer expenses.

Amazon may yet survive the Alibaba scare as both companies’ have an iron grip on their local markets. Amazon controls the much advanced U.S. e-commerce market, which will be a herculean task for Alibaba to crack without strategic acquisitions.

NASDAQ: EBAY

In the last fiscal year, Alibaba had 231 million active buyers, which is just 17% of China’s population. Its gross merchandise volume was larger than that of Amazon and eBay Inc combined. So if e-commerce companies are to make room for the Eastern Dragon, obviously eBay would fall.

Tech Stocks

While the aforementioned e-commerce stocks can also be listed under this category, there are more technology companies that are not involved in e-commerce but would be candidates for replacement when Alibaba come calling. One such stock is none other than the U.S. web portal and Alibaba shareholder Yahoo! (NASDAQ: YHOO).

Yahoo holds 22.5% of Alibaba, and for this reason it has seen its share price double over the last two years. However, Yahoo has failed to reinvent its core business and there have been suggestions that the company should be acquired by the Chinese internet juggernaut.

Many investors who may be locked out of the upcoming IPO are looking for it as a consolation to capitalize on the Alibaba IPO pop. Nevertheless, once the IPO burst is over, investors are likely to exit Yahoo.

Chinese Stocks

There are quite a number of Chinese stocks listed in the U.S. stock markets. Such stocks include Alibaba Chinese rivals JD.com (unprofitable but raised $1.8 billion in its IPO), Baidu Inc., and Tencent Holdings Ltd.

Many U.S. investors buy Chinese internet stocks to enjoy the benefits of the growing Chinese internet community. Baidu, Chinese answer to Google, presented them with such an opportunity. However, Alibaba controls 80% of the e-commerce market in China and it is obviously the best alternative to tap into this growing market.

Conclusion

Alibaba will be conducting a roadshow to familiarize itself to investors ahead of its IPO in New York. The two-week event may attract different types of funds, from technology to emerging market funds. Its IPO will give investors the opportunity to capture the Chinese online retail market, which by 2020 will be worth at least $420 billion (McKinsey Global Institute).

It’s NYSE:BABA for Alibaba IPO

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NYSE Outfox Nasdaq in Pursuit for BABA IPO

NYSE, NASDAQ, ALIBABA IPOChinese ecommerce giant Alibaba Group Holding Ltd has chosen the New York Stock Exchange (NYSE) over Nasdaq OMX Group Inc. for its initial public offer (IPO), and will lists its shares under the ticker symbol “BABA”.  The company revealed this in its amended filing on Thursday, setting another win for NYSE over Nasdaq.

Nasdaq is the home to a number of tech companies including Microsoft Corporation (NASDAQ: MSFT), Intel Corp (NASDAQ: INTC), Apple Inc. (NASDAQ: AAPL), Google (NASDAQ: GOOG) and Alibaba’s shareholder Yahoo! Inc. (NASDAQ: YHOO) However, NYSE is now emerging as the darling of many, having satisfactory handled LinkedIn Corp. (NYSE: LNKD), Pandora Media Inc. (NYSE:P) and Yelp Inc. (NYSE: YELP) debuts. According to data compiled by Bloomberg, by the year 2000 Nasdaq had hosted 243 tech companies’ debuts compared to NYSE’s five.

Why Alibaba Chose NYSE

The decision to list in the NYSE instead of Nasdaq stock market is probably as a result of how the latter handled Facebook Inc. ’s (NASDAQ:FB) IPO. Until now, Facebook IPO, which raised $16 billion 2 years ago, is the biggest ever Internet IPO. However, the social media’s offering was marred by investor confusion and trade delays that resulted in losses worth millions of dollars for brokerage firms.

Since Alibaba’s offering is going to be much bigger, the company cannot settle for anything less than an exchange that can assert control and avoid the headache and confusion that characterized the Facebook IPO.

NYSE Preying on Nasdaq’s Dented Image

The NYSE has benefited from Nasdaq’s dented reputation. Last year, Twitter Inc. (NYSE: TWTR) opted to list in the NYSE rather than Nasdaq, the de facto home of tech companies. Out of the 37 technology companies that IPOed last year, Nasdaq only managed to attract 15 compared to NYSE’s 22.  This year NYSE has already listed King Digital Entertainment Plc’s, Candy Crush-maker, and now Alibaba.

In one decade, dating from 2001, Nasdaq won 122 IPOs while NYSE registered merely 45. However, from 2012 January to the end of Q1 this year (March 31), the number of tech companies listing in the NYSE has eclipsed that at Nasdaq, with the two exchanges registering 45 and 35 respectively. Nevertheless, NYSE still trails Nasdaq in the amount of money raised from the IPOs during that period, which are $8.8 billion and $20.7 billion respectively, thanks to Facebook’s $16 billion offering at Nasdaq.

The only two available stock exchanges in the U.S. had been closely courting Alibaba after it had decided to shelve its Hong Kong stock market preference. NYSE lost leading web portal Sina (Nasdaq: SINA) and Chinese top search engine Baidu (Nasdaq:BIDU), but the exchanges have shared the spoils in 50-50 manner. All in all, Alibaba is a big catch for NYSE as far as high-tech companies with massive growth potential is concerned.

About Alibaba

Alibaba was founded in 1999 by a former English teacher turned tech- entrepreneur in Hangzhou, China.  The company, which turned profitable in 2002, has since grown to include a number of platforms including Taobao, Tmall, and a mobile payment platform, Alipay.  In 2005 Yahoo became the company’s largest single shareholder by acquiring 40% stake, but later in 2012, the internet pioneer cut this stake to about 24%. During the IPO, Yahoo is expected to further reduce this stake to almost 12%.

Alibaba’s business is better defined as a combination of Amazon and EBay. It filed for $1 billion IPO in May, though the value is eventually expected to be bigger.