Breakingviews: Alibaba's updated prospectus a mixed bag

China tech giant Alibaba's updated IPO prospectus has its positives, but signs of slowing revenue and its leadership lineup will do little to reassure skeptics, says Breakingviews' Peter Thal Larsen.

Published

9 months ago

Categories

Finance

Topics

Finance

People

Tara Joseph, Peter Thal Larsen, Mike Evans

Places

China, Asia

Companies

The Goldman Sachs Group, Inc., Alibaba.Com Limited, Reuters

Transcript

(SOUNDBITE) (ENGLISH) REUTERS REPORTER, TARA JOSEPH, SAYING: "Fresh nuggets of information about Alibaba revealed in a follow-up to their prospectus, Peter. And it looks like revenues are starting to dwindle, not very good news ahead of a big IPO. (SOUNDBITE) (ENGLISH) ASIA EDITOR, REUTERS BREAKINGVIEWS, PETER THAL LARSEN, SAYING: "That's right Tara, Alibaba is doing - it's almost like the dance of the seven veils. After initially putting out their prospectus, have now filed an update with a bit more information about their business. And though we think there are good bits and bad bits in this information that's come out, you're right, the revenue number is really something that people are focusing on. Alibaba published the results for its most recent quarters. And what that shows is that even though it continues to grow, it's not growing as quickly as it has been in revenue terms. And the other thing that's happening is that margins are coming under pressure, so actually less of that growth is coming through to the bottom line. And that will be a bit of a worry for people who are looking for a big valuation from Alibaba at the IPO." (SOUNDBITE) (ENGLISH) REUTERS REPORTER, TARA JOSEPH, SAYING: "You have to wonder as IPO comes closer in August, whether there are a lot other companies in China that are catching up to the lead that Alibaba had. But the other interesting bit here is about the inside partners, the guys who are really going to control this company. Does it look worrying from a corporate governance standpoint?" (SOUNDBITE) (ENGLISH) ASIA EDITOR, REUTERS BREAKINGVIEWS, PETER THAL LARSEN, SAYING: "Well, so you're right, I think there is-one of the worries about Alibaba is clearly competition. But actually, It think the bigger issue for Alibaba at the moment is the fact that a lot of its users are shifting to mobile phones and that makes it harder for Alibaba to pursue its traditional business model, which has been to try and charge people to advertise their shops on T-mall. And so that's actually one of the things that is squeezing Alibaba's revenue. And that will be a source of concern and people will be looking for signs that they're able to get the margins on the mobile business back up to where they are on the PC business. "On the governance-from the governance point of view, Alibaba has finally given us the 27 names of its partnership, its controlling partnership. That's really not a big surprise in a sense that it doesn't make a big difference, I don't think, to Alibaba's governance. One of the more interesting questions is the non-executive directors that they have named, who are going to sit on the board and who will be there to represent outsider shareholder's interests. Couple of big names there, C.H. Tung, the former Chief Executive of Hong Kong; Mike Evans, who was a vice-chairman of Goldman Sachs and is well known in Asia. But I think those names in themselves probably won't be enough to convince the governance skeptics that Alibaba is going to be run in the interests of shareholders. So, once again summing up the prospectus, some good things but also some things that will feed some of the worries about Alibaba." (SOUNDBITE) (ENGLISH) REUTERS REPORTER, TARA JOSEPH, SAYING: "As Peter says, some good things, some bad things, watch out for those revenues in Alibaba, and also keep an eye out for corporate governance worries." ENDS