IPO recommendation to the Alibaba group Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

IPO recommendation to the Alibaba group Case Study Solution

Why Jack Ma is intending to achieve from IPO:

There are many advantages of listing on stock exchange which the company will get by listing on recognized and established stock exchanges. Jack Ma is also eying to explore these opportunities and benefits which he will get after listing Alibaba on either NASDAQ or HKEx. The competition in the industry is intense and it is very difficult for Alibaba to compete with the companies like Baidu and Tencent who are bigger than Alibaba in terms of revenue and profits.

The primary factor which Jack Ma is trying to gain from the IPO is that it will allow him to raise large amounts of funds from the general public. It is very important for Jack Ma and Alibaba to raise additional funds which will allow them to take advantage from the increasing online shopping industry and to successfully compete with giants like Amazon and eBay. Furthermore, Jack Ma is also expecting to achieve higher brand awareness and recognition after the IPO.Currently, Alibaba is well known only in China and Asia and there is very little brand recognition in the US and other markets which is preventing Alibaba to expand its operations in the other big markets.On the other hand, Jack Ma can also attract competent staff and management if it goes public because the most competent personnel tend to be associated with the organization which have excellent brand recognition.

Target investors for Alibaba:

No specific class of investors is targeted by Alibaba as they are considering to raise finance irrespective of the class of financers. However, there might be certain benefits if they target a specific type of investors for the IPO, they should target general public in order to raise finance as it will be most beneficial for the company. The bargaining power of general investors is very low and they usually avoid to take part in day to day running of the business as compared to the institutional investors or other venture capitalists. In addition to this, they can also easily agree to pass the resolution which the directors and management propose to be implemented which can smoothen the process of developing strategies. Finally, the control of Jack Ma will not be diluted as the domestic investors have very little holdings in Alibaba which prevents them to exercise control over it.

Timing for the IPO:

Alibaba will have to get listed on the stock exchange as soon as possible, as the trading environment is expected to improve drastically in the upcoming days and the global economy will completely recover from the great recession. Arranging an IPO would enable to settle before the boom phase starts and to develop the strategies in advance. Furthermore, the brand awareness will be enlarged and enhanced prior to the industry boom which would allow Alibaba to take maximum market share.

Recommended exchange for Alibaba:

Both the stock exchanges i.e. NASDAQ and HKEx have their own merits and demerits for Alibaba, however, NASDAQ will be more beneficial for Alibaba because of various positive aspects which make it more beneficial. The main global competitors of Alibaba are listed on the NASDAQ exchange, by getting listed on this exchange, Alibaba would be able to compete with them more efficiently. Moreover, the investors at NASDAQ are more sophisticated and financially stable, they can invest higher funds in Alibaba.

On the other hand, the main advantage which is making NASDAQ more beneficial is the performance of NASDAQ in the last year. NASDAQ’s index went up by almost 39% while raise in the index of HKEx was just 2.5%. Furthermore, Alibaba can also obtain debt finance more easily in the future if it gets listed on NASDAQ because listing on NASDAQ is considered as more positive among the lenders. Finally, in the recent past there are many internet companies which are listed on NASDAQ which proved to be very effective whereas, no such successful IPO of internet company happened in HKEx which makes NASDAQ more attractive.

IPO recommendation to the Alibaba group Harvard Case Solution & Analysis

Suggested price range:

There can be many price ranges at which the management of Alibaba can value their shares on the first day of IPO. However, certain factors need to be considered when finalizing the price such as the price that could guarantee maximum number of shares subscribed. Moreover, the management of Alibaba should have to ensure that they don’t reduce the share price much so that it gives negative effect in the market. It is recommended that the management of Alibaba should value the share at a minimum price of $25 and the maximum price of $31 per share. These prices are based on the average share price of internet companies on the first day of listing and is also based on the discounted cash flows of Alibaba provided by the management..................

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