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Alibaba Profits More Than Double as U.S. IPO Looms

Stocks in this article: YHOO AMZN

NEW YORK (TheStreet) -- Profits at Chinese e-commerce giant Alibaba more than doubled in the fourth quarter to over $1.3 billion as revenue at the Jack Ma-founded company topped $3 billion. The company's revenue growth and rising profit margins augur well an expected initial public offering in the United States.

Alibaba Confirms U.S. Listing as Yahoo! Surges

For the Oct. to Dec. period, Alibaba earned $1.36 billion on $3.058 billion in revenue, a rise of 110% and 66%, respectively versus 2012 levels. Gross margins at the company rose to $2.37 billion, or 73% year-over-year.

Those results were disclosed in a supplement appended to Yahoo!'s (YHOO) first-quarter earnings. Yahoo is a 24% owner of Alibaba and is poised for a tremendous windfall when the so-called Amazon (AMZN), Google (GOOG) and PayPal of China lists its shares in 2014.

Results disclosed on Tuesday represent Alibaba's fourth quarter earnings and include its Singles Day on November 11, the company's biggest shopping day of the year. In mid-November, Alibaba said it generated $5.7 billion of sales on this year's singles day, including $877 million in mobile transactions.

For Alibaba, strong revenue growth and rising profit margins in 2013 mark a busy twelve months.

IPO On The Horizon

In March, the company confirmed will list its shares in the United States instead of Hong Kong. The move comes after a long-running dispute with Hong Kong regulators on Alibaba's partnership structure.

U.S. exchanges, however, approved of Alibaba's structure, a source close to the matter said. There is no indication whether Alibaba will list on the New York Stock Exchange or Nasdaq. The timing of the prospective offering also remains unclear.

The Partnership

Alibaba's partnership extends to company founder Jack Ma, over two dozen senior executives who have served the company for at least five years and contributed to the company's development over the years. Partners own approximately 10% of Alibaba's shares while the rest are held by Yahoo!, Softbank, and a handful of private equity and sovereign wealth investors.

Collectively, Alibaba wants to conduct an initial public offering where its partnership will have the ability to nominate a majority of the company's board of directors. The partnership structure, however, does not call for a dual class listing of shares that might give Mr. Ma, insiders and original investors increased voting rights for their shares.

While Alibaba's partnership would be able to nominate a majority of the board, the election of those nominees would come down to a shareholder vote where every investor would have the same voting rights. According to Alibaba, it's partnership structure is aimed at preserving the company's culture.

"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," Alibaba said in March.

Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan and Morgan Stanley will lead Alibaba's IPO, while Citigroup will have a slightly more junior role, a person close to the situation told TheStreet in March.

-- Written by Antoine Gara in New York

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