Investing in Alibaba, Pre IPO, in IG’s Grey Market

by Adam on September 17, 2014

business IPOThere’s a internet company that soon will be worth more than Amazon.com

It’s often described as a cross between Amazon, Ebay, and Paypal.

It’s huge in China, and although not well known in the west, already owns stakes in companies you may have heard of like Uber, Lyft and the search engine app Quixey.

And you have an opportunity to get a piece of the action before its shares are publicly traded in a huge Initial Public Offering (IPO) when it starts trading on the New York Stock Exchange in the next few days.

Intrigued?

The Chinese company is called Alibaba and the huge internet e-commerce business is predicting its IPO will value itself at $167 billion if it prices at the high end of its range. As a comparison, Amazon has a $160 billion market cap. And for context, that little internet auction site eBay’s only has a $67 billion market valuation.

On a price per share basis, Alibaba’s new target IPO price range is between $66 and $68 a share (It was set initially between $60 and $66 a share.) and all this new money from the IPO (potentially $25 billion) will mean the site will have plenty of cash to put into research and possibly acquisitions of more Technology companies, so the future looks bright.
If you’re interested in investing in Alibaba, the self proclaimed ‘largest online and mobile commerce company in the world’, you cannot buy shares directly until the IPO, but there is a way to capitalise on the opportunity at this stage, through what’s known as the ‘Grey Market’.

A grey market is a parallel market which allows for the trade of a commodity, legally but unofficially.

IG allows you to trade on the Grey market for many pre-IPO companies including Alibaba: IG offers a Alibaba marketplace to invest in Alibaba before the IPO, and after.

At IG you can trade on their grey market before shares are released and do other things such as Spread bet, trade CFDs or use the stockbroking service to trade Alibaba shares after the IPO.

There’s a lot of demand for owning a piece of the internet giant because, quite simply, it sells so much stuff.

Using gross merchandise volume as a metric, the value of all the merchandise changing hands on a platform over a given time, Alibaba generated $248 billion of gross merchandise volume in 2013. Compare this to Amazon’s figure of $116 billion, according to estimates by IDC, and you can see what all the fuss is about.
In fact, if you add up the value of goods being exchanged on Alibaba, it’s greater than that of Amazon, eBay, JD.com (JD) and Japanese e-commerce giant Rakuten — combined.

Alibaba’s dominance may grow even further as China’s middle class continues to expand. So if you already have sensible diversified investments and want to speculate with what looks to be an investment with a lot of potential, then investing in Alibaba pre or post IPO could be what you’re looking for.

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