Alibaba Eyes Used Cars, Korea, Mid-Sept IPO

Alibaba ties up with China Grand Auto

E-commerce leader Alibaba is supposedly in a quiet period in the run-up to its upcoming multibillion-dollar IPO, but you would never know that based on the steady stream of headlines that keep emerging about the company. In all fairness, many of the IPO-related headlines are probably coming from investment banking sources who are trying to hype the offer that could be the world’s biggest ever by a tech firm. But I suspect many of those reports are probably coming from company sources, including the latest reports that Alibaba is preparing to launch a used car e-commerce platform and move into South Korea.

Honestly speaking, I don’t have any objections to Alibaba’s constant prattle, as this is clearly one of China’s hottest companies and one that’s made billions of dollars in new acquisitions and other strategic moves since the beginning of last year. But if US securities regulators are really serious about enforcing the “quiet period” rule, then perhaps they should make a friendly phone call to Alibaba reminding it that comments from unnamed sources are technically in violation of those rules if those comments come from company officials.

Now that I’ve gotten my thoughts on Alibaba’s tactics out of the way, let’s look at the latest news bits starting with reports that the company is getting set to launch a used car e-commerce platform in partnership with China Grand Auto, one of the nation’s largest car sellers. (Chinese article) The reports, which cite unnamed sources, say the tie-up will also include an off-line collaboration, and that China Grand Auto is planning its own IPO in Hong Kong by year end.

There’s no additional detail, but I would expect such a collaboration would require funding commitments of $100-$200 million, with Alibaba likely to take a stake of 50 percent or less. The used car market looks like one filled with potential, though such second-hand cars also carry a certain stigma in China due to the preference for new things. On the whole, the deal could provide some new opportunity for Alibaba, but is probably much more significant for China Grand Auto.

Next there’s the reports on South Korea, following 3 recent trips by Alibaba founder Jack Ma to the country over the last half year. (Chinese article) The new reports include a photo of Ma shaking hands with South Korean President Park Geun-hye at a meeting this week, reflecting the fact that the government is a major player in the new tie-up. The reports are quite vague, saying only that Alibaba and South Korea could work together in online initiatives in e-commerce, games and video, which are all focus areas of the company.

We’ll have to wait for more details before saying if this agreement has any substance. Ma met earlier this year with British Prime Minister David Cameron to discuss similar initiatives, though we haven’t heard any announcements on that front since then. (previous post) Generally speaking, Alibaba’s limited number of overseas initiatives so far haven’t had a very big impact on its bottom line, though the company would clearly like to change that.

Lastly there are the new reports on the timing for Alibaba’s IPO on the New York Stock Exchange, which is expected next month. Alibaba had recently sought to list on the auspicious date of August 8, but gave up that plan due to shortness of time. (previous post) Now the latest reports are saying Alibaba expects to start its road show on September 3, just after the US Labor Day holiday, and list its shares on September 16. (Chinese article) That schedule looks relatively do-able and is probably close to what we can expect to see, though the timetable may get delayed by a few days due to the size and complexity of the deal.

Bottom line: Alibaba’s new used car venture and South Korean partnership are mostly talk designed to keep the company in the headlines in the run-up to its IPO set for mid September.

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