Tomahawk, WI 09/22/2014 (Basicsmedia) – In a discussion with Emily Chang on Bloomberg West, Paul Kedrosky, Bloomberg Contributing Editor, debates with Bloomberg’s Cory Johnson on the big ticket IPO of Alibaba Group Holding Ltd (NYSE:BABA) and the possible use of the proceeds from the IPO.
According to Kedrosky, Alibaba has been growing more inorganically as compared to organic growth as it has been aggressively acquiring businesses in the last 18 months. And given the fact that it has raised a record amount of $21.8 billion in the IPO, it seems obvious to him that Alibaba Group Holding Ltd (NYSE:BABA) would look for more opportunities of inorganic growth.
Johnson feels that the question is open on where they are going to use the cash. He feels that they may make acquisitions in the U.S. and take those technologies back to china or use the cash to expand some of the other things that they have got going in China or in other places of interest like Africa or India.
“I do think that to Paul’s point there are a lot of integral companies that Jack Ma (Executive Chairman of Alibaba Group) owns 90% of, so important that Alibaba had to list them in the IPO prospectus that may benefit or some of those investments may give personal benefit to Jack Ma so that he isn’t just the richest man in China but will be for a long time to come,” said Johnson.
On their chances of success & expansion in the U.S., Johnson said that Alibaba Group Holding Ltd’s (NYSE:BABA) revenues from international business has come down from20% three years ago to just around 9% in the last quarter and that it is becoming a smaller part of their business with every passing quarter, thanks to the fact that there is tremendous growth in China.
As a result, Johnson feels that it will be domestic growth compared to international growth like in the U.S. for Alibaba in the near future.
Moreover, Paul added that in case of expansion plans for Alibaba Group Holding Ltd (NYSE:BABA), there are 3 things which cannot happen together i.e. growth through acquisitions, growth through conglomerates and growth by geographies, so in the short run it’s China but in the long run its geographic growth especially in the U.S.