Alibaba filed for its highly anticipated IPO on May 6th 2014. This could be the largest IPO in terms of capital raised since Facebook and will bring to market a company whose market capitalization would be larger than 95% of S&P 500 companies.

Alibaba did not specify the number or price of shares it will offer or what valuation it will seek. Those details will likely be provided closer to the actual sale.

The filing has a temporary $1 billion placeholder amount, which is used to calculate registration fees.

Alibaba’s filing begins a process that will take several months before it becomes a publicly traded company. The company will likely make revisions to its filing document and has announced it will meet with investors during a formal roadshow, after which a price for the shares will be set.

Alibaba’s market value is estimated by analysts to be $168 billion¹, which as we mentioned would be bigger than 95% of the constituents of the S&P 500.

At current value estimates, Alibaba would be the second most valuable Internet company after Google which has a market cap of about $380 billion*. (Amazon.com is valued at $142 billion* and Facebook is valued at $162 billion*.)

Expectations are that the company is looking to sell about a 12% stake, which would make the offering around $20 billion based on the estimated value of $168 billion (Source: Bloomberg, Apr 2014).

NYSE or NASDAQ Listing?

The company still has to decide whether to list its shares on the New York Stock Exchange or NASDAQ Stock Market. Since Alibaba is not a U.S. company, it will not be eligible for inclusion in the S&P 500.

The NASDAQ-100 allows for the inclusion of foreign companies. As ETF Trends recently reported, Baidu, China’s largest Internet search provider, is a member of the NASDAQ-100, but not the S&P 500, although Baidu easily meets the market cap criteria to be an S&P 500 constituent.

It would still take several months before Alibaba could enter the NASDAQ-100. In a hypothetical example, if Alibaba goes public on the NASDAQ on June 15, it would not be eligible to enter the NASDAQ-100 until Oct. 1.

According to the index methodology of KWEB's benchmark, the CSI China Overseas Internet Index, if the total A share market cap of an IPO ranks top 10 in the overall market and it satisfies the requirements of the index universe, then fast entry rules are applied.

KWEB, the only pure play China Internet/E-commerce ETF, expects to fast track Alibaba's inclusion into the fund within 15 days after its listing, rather than waiting for the standard quarterly rebalance to be included.

There is no guarantee the mentioned IPO’s will be included in the index or fund

1.) Source: Bloomberg, Apr 2014

*Source: Google Finance, May 2014

Sources: iResearch, CNNIC, Bloomberg, Reuters