The WSJ reports,"as Alibaba’s upcoming listing nears, many analysts and brokerages are coming up with their own estimates of how much the Chinese e-commerce giant’s initial public offering might actually be worth.
The latest is from Morningstar, which puts Alibaba’s equity value at $220 billion and expects the Chinese e-commerce giant’s IPO to raise $26 billion".
"At that price, it would make it the biggest IPO in history to top Agricultural Bank of China* s record $22.1 billion offering in Shanghai and Hong Kong in 2010, according to Dealogic, which tracks IPO data. It would also top the U.S.’s largest IPO to date–Visa’s $19.7 billion offering in 2008—as well as the top tech IPO in the U.S. – Facebook FB +1.72%’s $16 billion offering in 2012. Morning Star said its IPO estimate is based on media reports that Alibaba is likely to offer 12% of its stock in the IPO".
The estimates are no doubt on the bullish side. Sanford C. Bernstein put Alibaba’s valuation at $230 billion in late May, lower than its previous estimate of $245 billion before Alibaba filed its first IPO document in early May.
Morningstar analysts wrote in a report this week that Alibaba’s shopping sites are well-positioned to benefit from the market’s growth in part because they have powerful “network effects” — millions of sellers keep attracting hundreds of millions of shoppers, which in turn attracts more sellers and makes the sites even more dominant.
The report also said that China’s nascent e-commerce market has plenty of room for growth, citing expectations that the country’s middle class population – with annual incomes between $10,000 and $60,000 – will double to about 600 million by 2020.
All of those points – the prospects for China’s e-commerce market and Alibaba’s dominance – are similar to those emphasized by other analysts who are also bullish on Alibaba’s IPO.
“We believe Alibaba’s IPO should be on the radar screens for investors seeking exposure to China’s emerging middle-class consumers as well as its e-commerce, technology, and logistics industries,” it said. Morningstar expects Alibaba to price its IPO in early August.
