Value of Two Alibaba Units Adds Intrigue to IPO
Just weeks ahead of its initial public offering, Alibaba Group Holding Ltd. tripled its net profit in the first quarter. The spotlight is on two of the company’s recent acquisitions, which forced Alibaba to reassess the value of some of its private assets. Commenting on the company’s decision to put a value on its private assets in an interview with The Wall Street Journal, Prof. Zhaoyang Gu points out that the value of privately held assets is somewhat subjective because there is no liquid market for such assets…
Alibaba Group Holding Ltd.’s disclosure that its quarterly profit nearly tripled on a one-time gain is putting the spotlight on two of the company’s recent acquisitions.
The Chinese e-commerce giant, which is expected to go public on the New York Stock Exchange next month in what could be the largest initial public offering in U.S. history, said in a filing with the Securities and Exchange Commission Wednesday that it booked a US$1 billion investment gain in the quarter through June because of recent deals that turned mobile Web browser maker UCWeb Inc. and export services provider OneTouch into wholly owned units.
These acquisitions forced Alibaba to reassess the value of UCWeb and OneTouch. As a result, the value of Alibaba’s previously held equity interests jumped more than 80 percent for UCWeb to 7.99 billion yuan (US$1.3 billion) and nearly fifteen-fold for OneTouch to 2.92 billion yuan.
Accounting experts say that putting a value on private assets like UCWeb and OneTouch is tricky and the reassessment is particularly noticeable as it comes just weeks ahead of Alibaba’s initial public offering.
Commenting on the company’s decision to put a value on its private assets in an interview with The Wall Street Journal, Zhaoyang Gu, Professor and Director of School of Accountancy at The Chinese University of Hong Kong Business School, points out that “The value of privately held assets is somewhat subjective because there’s no liquid market for such assets.”
The higher valuations for UCWeb and OneTouch could however indicate that Alibaba has bigger plans for the two companies as it fully integrates their businesses into its sprawling e-commerce empire, analysts say. UCWeb, in particular, is expected to play a major role in Alibaba’s attempt to expand its mobile services… Read More (PDF)
Source: Dow Jones Newswire / The Wall Street Journal
Date published: 28 August, 2014
Photo: Bloomberg News