How bold Alibaba could shake up Silicon Valley

Chinese e-commerce giant Alibaba's float will have to clear a few regulatory hurdles in the US, but the scope of its ambitions could inspire other tech companies.

If you didn’t know Jack Ma’s name before this week, chances are you do now.

The company that the former teacher founded out of his Hangzhou apartment in 1999, and of which he remains executive chairman, has announced it will launch one of the biggest floats in corporate history.

Alibaba is the largest e-commerce company in China and some say the world, depending on what figures you look at and how much you trust those figures.

Its services include a business-to-business marketplace (alibaba.com), a business-to-consumer marketplace (Taobao Mall or Tmall) and an eBay-like consumer-to-consumer marketplace (Taobao).

Tmall and Taobao are estimated to have handled $US250 billion in transactions in 2013, making them bigger than Amazon and eBay combined.

This week Alibaba announced its intention to launch an IPO in excess of $US1bn on the US market and one which analysts are expecting could raise as much as $US20bn.

To put that in perspective, Facebook raised $US17bn when it went public in 2012. Visa still holds the record for the biggest IPO in the US when it raised $US19.7bn in 2008.

The Alibaba float is going to face a number of obstacles, and it will be interesting to see if it clears them.

Firstly, Alibaba will have to open up its books. It has already said in the prospectus that it will not file reports and financial statements with the US Securities and Exchange Commission “as frequently or as promptly” as American companies.

The SEC in January issued an outright ban on the Chinese affiliates of the Big Four accounting firms PricewaterhouseCoopers, Ernst & Young, KPMG and Deloitte & Touche for failing to produce audit work papers related to nine US-listed Chinese companies

While Alibaba’s books are audited out of Hong Kong, Chinese secrecy laws still apply.

Under the proposed listing, Ma and other top executives will get to nominate half the board members. The Hong Kong exchange refused to accept the structure because, as we know, boards function better when they are accountable to shareholders.

It is also likely to grate on the US that its own tech companies like Twitter, YouTube, Facebook and Google have all been banned from competing in China and yet allowing Alibaba into the US will give the giant an opportunity to grow even bigger and attach a layer of credibility in the international market that the company would not enjoy operating solely in China.

The US also stonewalled another leading Chinese technology company, Huawei, from the US market and from bidding on US-based contacts because of security concerns.

The Obama administration also publicly took Alibaba to task back in 2012 for the amount of counterfeit goods being sold on Taobao.

However while Jack Ma may come off a little eccentric, for many starch-collared American corporate types the way he does business is very Silicon Valley.

Alibaba employees are known as "Alipeople” and are all given nicknames from characters in kung fu movies. The Financial Times reports that Ma’s nickname is Feng Qingyang, named after a swordsman who was “unpredictable and aggressive”.

He was also ahead of the curve when he launched Taobao in 2003 and refused to charge fees on transactions.

The then-CEO of eBay Meg Whitman called Ma out on the move.

“Free is not a business model. It speaks volumes about the strength of eBay’s business in China that Taobao is unable to charge for its products,” she said. Now, many companies have abandoned fees and eBay’s lost most of its market share in China.

Ever one for a colourful quote, Ma foreshadowed how the battle against eBay would turn out.

“eBay may be a shark in the ocean but I am a crocodile in the Yangtze River. If we fight in the ocean, we lose – but if we fight in the river, we win.”

(By the way, you should check out Porter Erisman’s 2012 documentary on Ma, Crocodile in the Yangtze. It chronicles Ma from 1995 to 2009 and spends a lot of screen time looking at Alibaba’s battle against eBay.)

As the crocodile tries to claw its way onto US shores, don’t expect it to be easy.

But if these aforementioned obstacles can be cleared, then Alibaba’s presence should be something to get excited about. In a country that believes competition enables everyone to bring their A-game, then having Jack Ma and his cohorts in Silicon Valley is bound to encourage some bold and wacky ideas.

Mathew Murphy is a Walkley Award-winning reporter based in New York.