Financial News

  • 18 March 2014, 15:10

Wellcome Hits Alibaba Jackpot In 120bn Float

Britain's biggest medical research charity is poised to land a huge windfall from the 120bn flotation of Alibaba, the Chinese e-commerce giant.

Sky News can reveal that the Wellcome Trust has owned a small stake in Alibaba Group for several years, a shareholding that is now expected to be worth hundreds of millions of pounds when the company lists in the US this year.

Insiders said the Wellcome Trust, which is one of the world's most renowned medical research organisations, owned less than 1% of Alibaba's shares, although the exact size of the holding was unclear.

However, with the Chinese company expected to be valued at up to a vast $200bn (120bn) after raising an anticipated $15bn (9bn) by selling new shares to investors, the UK-based charity's stake is nevertheless expected to deliver one of its best-ever investment returns.

Alibaba, which is headquartered in Hangzhou, one of China's so-called second-tier cities, dominates the country's e-commerce industry.

It acts as an eBay-style intermediary in the supply and sale of goods online, having established marketplaces targeted at small business traders as well as consumers.

Using the brand-name Taobao, an e-shopping platform that in China has more than 500m customers, Jack Ma, Alibaba's founder and chairman, has become one of the world's most successful technology entrepreneurs.

A statement from the company issued at the weekend said: "Alibaba Group has decided to commence the process of an initial public offering in the United States.

"This will make us a more global company and enhance the company's transparency, as well as allow the company to continue to pursue our long-term vision and ideals."

Analysts say the listing is expected to raise up to $15bn (9bn), which would make it the technology industry's largest IPO since Facebook in 2012.

Talks between Alibaba and the Hong Kong Stock Exchange ended without success because of the company's desire to create an alternative shareholding structure that would have given executives additional control over the company.

The battle among investment banks to work on the initial public offering (IPO) has been one of the fiercest ever seen. Alibaba has picked Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley and Citigroup to handle the deal.

If Alibaba raises more than $16bn through its flotation, it would overtake Facebook as the largest-ever IPO.

News of the Wellcome Trust's investment in Alibaba is in itself unsurprising given the charitable foundation's track record of acquiring shareholdings in fast-growing technology companies.

Last year, it sold a stake in Wonga, the payday lender. The proceeds from such transactions are funnelled into its 650m annual research budget.

The value of the Wellcome Trust's 14.5bn endowment fund has risen 165% over the past decade and its investment team is widely regarded as one of the shrewdest in any sector.

Sources close to the investment said the Wellcome Trust had bought Alibaba shares on two separate occasions, the more recent of which was when the US internet group Yahoo! reduced its stake in its Chinese counterpart in 2012.

It is not known whether the Wellcome Trust plans to retain its shareholding in Alibaba after the IPO takes place, or how much the foundation paid for its shares.

The Wellcome Trust declined to comment on Monday.