Alibaba.com IPO

Like the eponymous fable, Alibaba.com is a good yarn. The holding company, Alibaba Group, was founded on a shoe-string and the upcoming IPO will make chairman Jack Ma one of China's richest men. Subsidiary Alibaba.com, an online business-to-business marketplace for mainly small and medium sized suppliers and buyers, now boasts 24m users. As such, it taps into growth in both trade and the increasing participation of SMEs in the economy. Explosive growth in online advertising - JP Morgan forecasts around 40 per cent per annum this year and next, roughly double the rate of growth in the bigger US market - should benefit Alibaba.com, which charges for add-on marketing features like online storefronts. Goldman Sachs (NYSE:GS), an underwriter on the $1.3bn IPO, expects this year's net profit to increase 186 per cent to $84m.

Still, the relatively undemanding price tag and tight free float suggests Alibaba.com and its advisors are not counting on its China internet credentials alone. The HK$10-12 share price equates to around 45 times forecast 2008 earnings on a pre-stock compensation basis, slightly above Alibaba.com's smaller B2B peers but approaching half the multiple of more high-profile Chinese internet stocks like Nasdaq-listed Baidu. The company will have a free float of just 15 per cent, and has already secured a clutch of cornerstone investors, including Yahoo Inc of the US. The Hong Kong listing, while logical, suggests Alibaba.com is playing it safe rather than seeking a higher Nasdaq-style multiple. That said, it would take a serious turn in market sentiment to stop Alibaba.com enjoying a fairy tale ending when it starts trading next month.