Here's Alibaba's Game Plan For Its Enormous $US20 Billion IPO

Jack Ma AlibabaChinaFotoPress / Getty ImagesAlibaba founder Jack Ma

After Chinese internet giant Alibaba filed for an initial public offering back in early May, some investors complained about the initial filing being too vague. In response, Alibaba will likely release more details about the potential $US20 billion IPO next week, people familiar with the matter told The Wall Street Journal’s Telis Demos.

Alibaba will go public in a few months in what could be the biggest IPO ever. The company will be selling a large chunk of shares, but Alibaba’s bankers are trying to find demand for at least four or five times whatever it sells so the price won’t plummet after it hits the market. Typically, bankers look for demand for only two or three times as much as they are selling.

To raise $US20 billion, the underwriters — including Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, and Citigroup — will have to generate demand for more than $US100 billion worth of shares.

The Wall Street Journal’s sources say that some investment firms are expected to consider as much as $US1 billion worth of stock.

To help investors better understand the company’s future, Alibaba’s new filing will likely show the gross merchandise volume (total value of all the goods sold) of Alibaba’s individual retail businesses. The original filing just listed the gross merchandise volume of all of Alibaba’s retail sites — including the eBay-esque Taobao and the its brands-to-consumer site Tmall.

The total value of all the goods sold on Alibaba’s sites was $US248 billion in 2013, which is more than double the $US100 billion in transactions that Forrester Research lists for Amazon.

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