Tiger Global Management, a top-performing technology investment firm based in the U.S., recently built a stake in Chinese e-commerce giant Alibaba Group, ahead of what will likely be one of the largest tech IPOs ever, according to four people familiar with the situation.
Tiger Global purchased roughly $200 million worth of shares, one of the people said, while another said the transactions valued Alibaba at about $125 billion. Such investments are closely watched on Wall Street because U.S. Internet company Yahoo owns 24% of the Chinese firm.
Tiger Global bought the stock in late 2013 in the so-called secondary market, which facilitates trading between shareholders of private, pre-IPO tech companies. Deals can also be arranged between investors and company employees through official tender offers.
Tiger Global bought Alibaba shares from other investors, not through a tender offer, two of the people said. All four sources did not want to be identified because Tiger Global's activities are private. An Alibaba spokeswoman declined to comment, as did a spokeswoman representing Tiger Global.
Tiger Global, headed by Chase Coleman, runs hedge funds that invest in publicly traded tech stocks. However, the firm also manages other, longer-term vehicles that back private tech companies, including Eventbrite, Nextdoor and Warby Parker.
The latter funds are run by Lee Fixel and Scott Shleifer, who have made names for themselves in Silicon Valley by making big investments in late-stage, pre-IPO start-ups and helping them expand globally. Shleifer was involved in the Alibaba investment made by Tiger Global.
The value of Alibaba has surged recently. In December, RBC Capital Markets Internet analyst Mark Mahaney estimated the company was worth $150 billion, up from a previous valuation of $110 billion. In September 2011, when a group led by Silver Lake Partners and Digital Sky Technologies invested $1.6 billion, Alibaba was valued at about $32 billion.
Those gains came as the company's profits more than doubled to more than $700 million in the year ended June 30, 2013, and Wall Street readies for what will be one of the largest tech IPOs ever — either later this year or in 2015.
"Alibaba is an amazing company and preparing to IPO. That's when secondary market investors get very interested," said Lou Kerner, managing partner of the Social Internet Fund, which invests in social and mobile companies in primary and secondary markets.
Alibaba mulled a U.S. listing last year after the company and the Hong Kong Stock Exchange disagreed about corporate governance. However, Hong Kong may be relaxing some of its rules, making a listing on that Asian market more likely.
When Alibaba goes public, the company and its bankers will likely pick a conservative valuation; however, the stock will probably jump when it starts trading, pushing the value as high as $190 billion, says Eric Jackson, of tech hedge fund firm Ironfire Capital.
"I'm very bullish on what the valuation will be," he added. "It's a large business compared to Amazon and eBay, growing quickly and much more profitable than those companies."
Ironfire owns shares of Yahoo, which have doubled in the past year as the value of its Alibaba stake ballooned.
Tiger Global has already benefited from that move. The firm owned 25 million Yahoo shares at the end of September 2012, according to regulatory filings. It still held 8 million shares as of Sept. 30, 2013.
Source: USA Today, January 20th 2014
