Jack Ma Prepares for IPO by Taking Alibaba.com Private
Alibaba Group chairman Jack Ma completed the privatization of its leading subsidiary Alibaba.com by having its shares delisted from the Hong Kong Stock Exchange Wednesday.
The withdrawal of the listing took effect at 4 p.m., marking the privatization of the Alibaba Group’s only publicly traded subsidiary, according to a statement jointly issued by the group and the website Wednesday morning.
Alibaba.com’s privatization was approved Friday local time by the Grand Court of the Cayman Islands where the group is incorporated since most of the website’s minority shareholders had voted in favor of privatization in late May. At that time Alibaba offered to buy back the 26% stake owned by minority shareholders for HK$13.5 ($1.74) a share, at a total cost of HK$19 billion ($2.45 billion).
The move came after Ma had struck a deal to buy back for up to $7 billion up to half of the roughly 20% of Alibaba’s fully diluted shares being held by Yahoo. The agreement with Yahoo also requires Alibaba to buy back Yahoo’s remaining 10% stake if it conducts an IPO by the end of 2015. Presumably at that time the shares would be worth considerably more than they are currently.
Taking Alibaba.com private will give him the freedom to make long-term changes that would benefit the B2B ecommerce portal’s customers, thereby improving its position in the marketplace, Ma explained when the plan was announced in February. Analysts took that to mean that he hopes to position the entire group for a major IPO in the future.
Alibaba.com is China’s leading business-to-business ecommerce portal. It matches wholesale buyers with manufacturers and distributors. Last year Ma began focusing on improving the quality of sellers on Alibaba.com by making membership more exclusive. The move led to a drop in the number of vendors and an improvement in the level of service obtained by buyers.
Ma founded Alibaba.com in 1999 in Hangzhou, the capital city of Zhejiang province. He took it public in 2007. The Alibaba Group includes, in addition to Alibaba.com, Taobao, a leading C2C online shopping destination, and Tmall.com, a popular B2C online marketplace for brand-name goods, as well as eTao, a shopping search engine.
“There is no timetable for the group’s IPO,” said Zheng Ming, the group’s chief strategy officer at a press conference Wednesday afternoon. “As for the year 2015 mentioned in our agreement with Yahoo, it may be a time that both sides feel reasonable.”
The delisting of Alibaba.com is seen as a way to preserve the secrecy of the company’s grand business strategy which appears to be to create an internet ecommerce behemoth which, as a group, can raise upwards of tens of billions in a large-scale IPO.
Ma was also anxious to avoid having a large interest in Alibaba.com fall into the hands of a potential rival as could have happened had a struggling Yahoo become the target of a hostile takeover or agreed to sell to one of several potential suitors.