China's Alibaba: Internet Giant's IPO Seen Soon

Alibaba Group is described as Amazon, eBay, PayPal and Google all wrapped into one and potentially the biggest tech IPO ever.

Analysts think China-based Alibaba will file for an IPO in the next few months that could raise about $20 billion, with a market valuation of $100 billion to $150 billion. That would surpass Facebook's (FB) $16 billion IPO in May 2012, which holds the title as the biggest U.S. tech new issue.

"Every global growth manager is going to want to own Alibaba," said Bill Whyman, analyst at International Strategy & Investment. "This is going to be humongous.

Alibaba is expected to list in the U.S., though it could choose the Hong Kong Stock Exchange.

Key rival Tencent, which listed in Hong Kong in 2004, has a $130 billion market cap.

Alibaba was founded in an apartment in 1999 by Jack Ma as a business-to-business e-commerce website. It now consists of nine business units.

In addition to Alibaba.com, a global e-commerce platform for small businesses, other sites include Taobao.com, China's top consumer-to-consumer online marketplace and a rough equivalent to eBay (EBAY). Tmall.com is a business-to-consumer platform, Etao.com a shopping search-engine platform. It has a PayPal-like online payment website called Alipay.com. Its cloud services platform is called Aliyun.com, akin to Amazon (AMZN) Web Services.

It's also pushing into social gaming and mobile technology, a field dominated by Tencent, China's top Internet company by revenue. Tencent reported revenue of $2.5 billion in Q3, up 34%.

"Many people think of Alibaba as an e-commerce company but their vision is much broader and more ambitious," said Whyman. "They want to be the preferred platform for all high-volume customer data in China, and that could include financial services, online travel and a broad range of other digital services.

He sees Alibaba, search leader Baidu (BIDU) and Tencent as China's dominant Internet platforms.

Alibaba generated $5.75 billion in sales on Nov. 11, known as Singles' Day and China's biggest online shopping day. Its sales soared 84% vs. the same day in 2012.

Alibaba accounts for more than 50% of online retail sales in China, according to an RBC Capital Markets report. Amazon, in comparison, accounts of 20% of U.S. online sales, the report said.

"If you want to bet on Internet companies in China, Alibaba is as pure play as you can get," said Sam Hamadeh, founder and CEO of PrivCo, a provider of private company financial data and research. "China has kept a lot of Western players out of their market and this has helped Alibaba.

Alibaba's future remains bright, analysts say. E-commerce is still expanding rapidly in China. Alibaba also is pushing into gaming and mobile platforms, as well as moving overseas, including the U.S.

"Alibaba's plans are very ambitious ," said Whyman.

Revenue in the three months to September rose 51% vs. a year before to $1.78 billion, on net income of $801 million, Yahoo (YHOO) said Tuesday. That's slower than the prior quarter's 61% sales gain.

Yahoo reveals Alibaba's financials because it owns a 24% stake in the still-private company.

It initially bought 40% of Alibaba in 2005 for $1 billion. Yahoo reported a 2012 pre-tax gain of $4.6 billion related to selling some shares back to Alibaba. As of Q3, Yahoo estimated its Alibaba stake was worth $8.1 billion.

Alibaba has rights to buy half of Yahoo's remaining stake in an IPO. Analysts are figuring that into Yahoo stock and earnings targets.

"The anticipated valuation increase on Alibaba's IPO has been a catalyst on Yahoo's stock appreciation," wrote Martin Pyykkonen, analyst at Wedge Partners, in a report based on Yahoo's Q4 results. Yahoo's core business is struggling, but its stock is up 82% in the past 12 months.

It fits the pattern of most anything tied to Alibaba. Qihoo 360 (QIHU) rose 9% on Jan. 8 amid speculation — denied by Qihoo — that Alibaba might buy a stake. Sina (SINA) rose 9.5% on April 29, when it said Alibaba would pay $586 million for an 18% stake in Sina's Weibo, a micro-blogging site like Twitter (TWTR).

In May Alibaba announced a strategic alliance with AutoNavi (AMAP) to develop location-based e-commerce opportunities. And, in January, Alibaba said it would develop a mobile gaming platform.

Alibaba is extending its tentacles into America. Its new U.S. investment arm led a $206 million funding for ShopRunner, a provider of Amazon-like services. It's also an investor in Fanatics, a sports merchandise retailer and mobile search technology firm Quixey.

"Alibaba is expanding into a lot of different areas that threaten other Internet players," said Juan Lin, analyst at Wedge Partners. "So far it seems nothing is a challenge for them.

The New York Stock Exchange is expected to win Alibaba's listing, though it's far from certain. An SEC administrative judge's recent decision to suspend accounting giant's China units could divert some new Chinese listings from the U.S. to Hong Kong.

Among Alibaba's early investors were Goldman Sachs (GS), Fidelity Investments' venture arm and Japan- based Softbank, which owns 36.7%.

Ma, an English teacher before Alibaba, has a $7 billion net worth, double a year ago, Forbes estimates. Jonathan Lu took over as CEO in May after serving in var ious roles since 2000. Ma is now chairman.

Alibaba declined to comment for this story.

"This is a very profitable company growing in the high digits," said Hamadeh. "It makes sense they will turn their attention toward buying European and U.S. companies. It's only a question of when."