Alibaba investor says IPO value not from 'bubble'
SoftBank's Masa Son says Alibaba's valuation isn't a repeat of the dot-com bust.
Alibaba's huge valuation is not the result of some growing tech bubble poised to burst, according to a major Alibaba investor who pointed to the company's enormous footprint as proof.
"Back then there was a vision and so on, but no profit," Masayoshi Son, Alibaba investor and founder of Japanese Internet company Softbank, said at Recode's Code Conference in Rancho Palos Verdes, Calif., on Wednesday. "This time there is a big profit. I would say this time people got smarter on the investor side. This time I wouldn't call it bubble."
Son was referring to 2000 when the quick rise of new tech companies, and the influx of money, abruptly dissipated. Alibaba, a company that launched at the tail end of the bubble, has grown into the largest e-commerce platform in China. It's now valued somewhere between $150 billion and $250 billion, and is expected to have the largest initial public offering the US has ever seen.
Softbank owns more than 30 percent of Alibaba's stock and was one of the company's earliest investors. Taobao, Alibaba's consumer marketplace that successfully pushed eBay out of the Chinese market in 2004, is a joint venture between the two companies.
Son, who sits on Alibaba's board, said the company's profit sets it apart from competitors. "You know Amazon. All of you know eBay," he said. "Both are great companies. I admire them very much. If you look at just the past year, if you look at the volume of product sales over their platforms, Amazon and eBay added together compared to Alibaba alone -- Alibaba surpassed. The combined profit by Amazon and eBay versus Alibaba, Alibaba again surpassed."
The Chinese company sold more than $240 billion worth of products last year, while Amazon and eBay, combined, sold less than $200 billion worth. Additionally, Alibaba's profit margin is above 40 percent. In contrast, Amazon and eBay combined is more like 15 percent.
"So you put the price tag on Alibaba yourself," Son said.
He also offered some thoughts on Yahoo's position. Softbank is tied to the US tech giant through Alibaba investments and Yahoo Japan, which is a joint venture between the two companies. Additionally, Yahoo owns 22.6 percent of Alibaba's stock, and could make $12 billion in cash from the company's IPO.
As a result, CEO Marissa Mayer is under pressure to prove that Yahoo can succeed beyond the company's well-made investment in Alibaba.
"Marissa (Mayer) is a smart person and I want Yahoo to be very successful...and I want her to be successful," Son said. "Marissa is going to have a lot of cash very soon, and I hope she can utilize that to reinvent (the company)."