Alibaba IPO

Like the eponymous fable, Alibaba.com is a good yarn. The holding company, Alibaba Group, was founded on a shoe string and the coming 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 24.6m users.

Explosive growth in online advertising - JPMorgan forecasts about 40 per cent a year 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 such as online store fronts. Goldman Sachs, an underwriter on the $1.3bn IPO, expects this year's net profit to rise 186 per cent to $84m.

Still, the relatively undemanding price tag and tight free float suggests Alibaba.com and its advisers are not counting on its China internet credentials alone. The HK$10-12 share price equates to about 45 times forecast 2008 earnings on a pre-stock compensation basis, slightly above Alibaba.com's smaller B2B peers but a big discount to higher-profile Chinese internet stocks such as 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. 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.