Alibaba does IPO

Alibaba went public. The Chinese ecommerce company chose the New York Stock Exchange (after Honk Kong regulators refused) to launch their bid to go public. It has been branded the largest IPO of all times, with billions of dollars flying around. Alibaba’s CEO declared he wants to build a company bigger than Wal-Mart; an interesting concept when you consider that Alibaba, which is frequently compared to Amazon.com, doesn’t actually carry any inventory. Whether you compare it to Amazon.com or Wal-Mart, the key is that it’s purpose is only to arrange transaction between the seller and the buyer.

This is where things will get fascinating. Alibaba will either have to do much better than eBay, or change its business model and carry inventory. To be bigger than Wal-Mart it will have to achieve revenue above U$470 billion and nail down procurement and logistics. In addition, it will have to compete without government protection in a highly competitive market.

Many companies have had a go at China only to be beaten, having their IP stolen, and in some unlucky situations, even jailed; eventually they left. Now the Chinese are coming here. They will have to play by our rules; transparency and accountable to shareholders is not a concept they are used to. I am not sure if they understands that.