Alibaba continues run of Chinese e-commerce IPOs, highlights audit risks

May 8, 2014

Practitioner Insights thumbnail 2(Editor’s Note: This post is an excerpt from an article appearing in Practitioner Insights on WestlawNext)

China-based Alibaba Group Holding Ltd. filed with the SEC on May 6 to launch an initial public offering that is currently valued at $1 billion. Similar to many recent Chinese companies launching U.S. public offerings, the e-commerce company disclosed that a pending legal proceeding against five China-based accounting firms could adversely affect the company and legality of its financial statements.

 

Alibaba is a leading online and mobile e-commerce company, which operates a platform that allows third parties to sell merchandise to consumers. The company does not engage in direct sales, compete with its merchants or hold inventory.
Although the company included a $1 billion placeholder amount in its registration statement, Alibaba did not disclose the number of shares to be sold in the offering nor a price range for those shares. It is likely that the placeholder amount could increase once the company determines its valuation, as the company achieved revenue of $6.51 billion over the nine-month period ending on Dec. 31, 2013.

Alibaba’s IPO continues a trend of Chinese e-commerce companies hitting U.S. public markets. Since September 2013, China-based companies that have launched IPOs include:

  • 58.com Inc., which operates an online marketplace serving Chinese merchants and consumers;
  • Autohome Inc., which operates an online automobile information platform for Chinese consumers;
  • 500.com Ltd., which operates an online sports lottery service;
  • Qunar Cayman Islands Ltd., which operates a Chinese online travel platform;
  • JD.com Inc., a Chinese online direct sales company;
  • Leju Holdings Ltd., which provides online-to-offline real estate services in China;
  • Tuniu Corp., which operates an online leisure travel platform in China;
  • Jumei International Holding Ltd., an online retailer of beauty products; and
  • Zhaopin Ltd., which operates an online career platform in China.