Alibaba: New Hot Topic in Global Finance

Recent regulation has stifled Alibaba, specifically with their Alipay operation, a prominent online payment system in China. (Adrian/HK EET)
Recent regulation has stifled Alibaba, specifically with their Alipay operation, a prominent online payment system in China. (Adrian/HK EET)

Alibaba is one of the largest e-commerce businesses in the world. Since China has a powerful approach to government, a recent wave of regulations may hinder Alibaba greatly. The Chinese Central Bank announced on March 24 that it will cap the amount that Chinese can spend using smartphone payment services, potentially slashing a multibillion dollar opportunity for the Chinese Internet giant Alibaba.

Recent regulation has stifled Alibaba, specifically with their Alipay operation, a prominent online payment system in China. For instance, on March 14, the Chinese Central Bank blocked efforts by Alibaba to release virtual credit cards linked to their online payment tools, and settle payments using Quick Response (QR) codes.

Coupled with other regulation-related issues, Alibaba has since abandoned the Hong Kong exchange, and is currently preparing for its IPO in the U.S.

Alibaba’s IPO

Alibaba’s IPO comes amid a number of deals in China’s tech sector. According to The New York Times, every big bank in town wanted a piece of the Alibaba Group Holding Ltd IPO, which is set to be the biggest technology listing ever. In fact, they wanted them so much that, according to Thomson Reuters data, major banks skipped about $100 million in combined fees that could have been made.

According to The New York Times, people familiar with the matter say that the disregard for the $100 million in fees was because the banks didn’t want to irritate the Chinese e-commerce giant and risk missing out on an IPO expected to be bigger than Facebook Inc’s $16 billion listing in 2012. Additionally, banks did not deal with Alibaba’s rivals to muddy the waters and potentially be excluded from the huge deal that promises excellent results.

Alibaba is a hot topic in global finance, and banks are cautious with their actions in the hope of winning big on a company that dwarfs Amazon and eBay, and has an estimated value of $150-$200 billion based on an estimated 2015 earnings of $6 billion.

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