Financial Model for Alibaba

Description
Financial Modeling for Alibaba IPO. Here we will apply the DCF Model and try to evaluate the valuation of Alibaba. On 18 September 2014, Alibaba's IPO priced at US$68, raising US$21.8 billion for the company and investors. Alibaba was the biggest US IPO in history, bigger than Google, Facebook, and Twitter combined.

An IPO (or initial public offering) is stock being sold by a company to the public for the very first time.A firm conducting an initial public offering (IPO) needs to have its stock valued before the IPO, in order to determine a price range within which the stock will be offered to the public. There are several methods available for stock valuation. The most widely used valuation approaches are the dividend discount model (DDM), the discounted free cash flow (DFCF) method, and valuation approaches that rely on multiples of firms in similar industries and firms involved in similar transactions

The process of IPO valuation may be shrouded in mystery, but the smart investor can look at the financial statements to see if the stock is priced right.

The value of shares of an IPO is more closely aligned with the stock’s actual book value than with its investor sentiment-driven markup. If you go back to basics by analyzing the IPO's prospectus and objectively reviewing its balance sheet, you’ll be able to calculate its share value a little more realistically by looking at the tangible value of its assets.