Here's An Australian Fund Manager's View On The Value Of The Alibaba IPO

Alibaba will be the biggest IPO of all time but its main attraction is what it will become.

It is China’s dominant e-commerce business, an entire market place ecosystem, where internet penetration runs at only 46% and only 10% of business is done online.

Australian Nick Griffin, Head of International Strategy at K2 Asset Management, says many observers expect e-commerce to be a $1 trillion industry by 2025.

“Alibaba will have a huge piece of this pie,” he says. “It’s a very attractive business.”

But it’s all going to come down to valuation and Griffin says that is going to be comparable to Facebook or Tencent (China ISP) which is roughly 27 times forward earnings.

“You can’t deny that this is a great business which is growing quickly because it is essentially a play on China’s consumption which is one of the most powerful forces in the world today,” he says.

“It will be valued fairly, unfortunately. They don’t give these things away.

“But we think if you can stomach the multiple there will be longer term upside to the shares.”

More than $20 billion worth of shares are being sold in the IPO which would value the company between $160 billion and $180 billion. The share pricing range has reached $66-$68 from $60-$66.

There are reports from Wall Street that traders have been selling some tech stocks to raise funds for the Alibaba IPO. The Chinese e-commerce giant was being blamed for the drop in the tech-heavy Nasdaq, which was down as much as 1.2% on Monday afternoon.

Griffin says: “We’re looking to make a reasonable investment for the fund and potentially buy some more in the after market, depending on what price it comes on at.”

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