China's e-commerce giant Alibaba began trading its
shares Friday on the New York Stock Exchange. Here are ten things to know about
Alibaba, and why its initial public offering made history:
THE
BIGGEST
Alibaba
raised $21.8 billion in its debut, making it the biggest U.S.-listed IPO in
history after the IPO of credit card processing company Visa in 2008. If Alibaba's investment banks were to exercise their
option to sell an additional 48 million shares, it could make Alibaba's IPO the
biggest in the world, beating out the $22 billion IPO of Agricultural Bank of
China in 2010.
Alibaba
Group Holding priced its initial public offering at $68 a share, the top end of
the expected range, raising $21.8 billion on Thursday, in the latest sign of
strong investor appetite for the Chinese e-commerce giant.
At that
price, the IPO, one of the largest-ever, would give Alibaba a market valuation
of $167.6 billion, surpassing American corporate icons from Walt Disney to
Boeing. The offering also vaults it atop US e-commerce rivals like Amazon and eBay and gives it more financial firepower to expand in the United
States and other markets.
The stock
opened at $92.70 shortly before noon ET (1600 GMT) and quickly rose to a high
of $99.70, before paring gains to close at $93.89. Some 271 million shares
changed hands, more than double the turnover on Twitter Inc's first day last
year, although still short of volume for the General Motors Co and Facebook Inc
IPOs.
DON'T
FORGET YAHOO
It may
have been a big day for Alibaba and its founder Jack Ma, but Yahoo's investors
are feeling pretty good after Alibaba's IPO. Yahoo was an early investor in
Alibaba, paying $1 billion for a stake in the company in 2005. Yahoo likely
made $8.3 billion to $9.5 billion in Alibaba's IPO, and will still own a 16
percent stake in the company worth $37.7 billion.
ALIBABA
ECLIPISES SILICON VALLEY
Alibaba now has a market capitalization of roughly $219.8 billion, according to FactSet. That makes the company bigger than some of the U.S. technology industry's most successful names, such as Facebook, eBay, and even Amazon.com.
ALL IN ONE
Alibaba now has a market capitalization of roughly $219.8 billion, according to FactSet. That makes the company bigger than some of the U.S. technology industry's most successful names, such as Facebook, eBay, and even Amazon.com.
ALL IN ONE
Investors
are interested in Alibaba because the company dominates many businesses in
China that, here in the U.S., are run by individual companies. Alibaba owns the
websites Tmall and Taobao, which are similar to Amazon.com and eBay,
respectively. The company also earns money from transaction fees related to its
various businesses through Alipay, which is like PayPal. That's just three of
Alibaba's many subsidiaries.
BIG
PROFITS: Unlike the U.S. e-commerce giant Amazon, Alibaba has been consistently
profitable. The company had $8.5 billion in sales in its latest fiscal year
ending in March, with net income of $3.8 billion. The year prior, Alibaba had
$5.4 billion in sales and $1.4 billion in profits. In comparison, Amazon sold
$74.4 billion in goods in 2013, but made only $274 million in profits that
year. In 2012, Amazon reported a net loss of $39 million.
Alibaba's
revenue surged 46 per cent in the April to June quarter on strong gains in its
mobile business, with net income attributable to its shareholders nearly
tripling to $1.99 billion, or 84 cents a share.
RISKS
RISKS
If Alibaba
does well for investors, it will be the exception to what has been the trend
for Chinese companies. When Chinese companies have listed stocks on American
markets, their shares have lost an average 1 percent a year for the next three
years, compared with an average 7 percent annual gain for other U.S. IPOs,
according to research by Jay Ritter, a finance professor at the University of
Florida.
SECOND TIME AROUND
SECOND TIME AROUND
This isn't
Alibaba's first time going public. Alibaba took its online shopping portal
Alibaba.com public in 2007 in Hong Kong. Alibaba.com was a publicly traded
company only for a few years. Alibaba took Alibaba.com private in 2012.
SOLID
GOLD
Jack Ma,
who started Alibaba in 1999 in his apartment in the Chinese city of Hangzhou,
is now among the richest people in the world. Ma's ownership in the company is
worth roughly $18.2 billion, based on Alibaba's closing share price Friday.
That doesn't include the shares he sold in the IPO, which are worth another
$867 million, and his other investments. Bloomberg put his entire net worth at
$21.9 billion, making him the 34th richest person in the world.
BIG WIN FOR NYSE
BIG WIN FOR NYSE
Alibaba
chose to list its shares on the New York Stock Exchange, making it the second
A-list technology company to go public on the Big Board in less than a year.
The NYSE handled Twitter's IPO last year. NYSE's competitor, the Nasdaq Stock
Market, has struggled to win the business of big tech companies since
Facebook's IPO in 2012, which was plagued with technical problems.
LIFE IS LIKE A BOX OF...
LIFE IS LIKE A BOX OF...
Jack Ma
biggest hero is the fictional character Forrest Gump. "I really like that
guy," Ma said, in an interview with business channel CNBC on Friday.
"Every time I'm frustrated, I watch the movie. (The movie tells) me that
no matter whatever changed, you are you."
SAID…
"It
was one of the more impressive IPO presentations," said Jerry Jordan, manager of the $48
million Jordan Opportunity Fund. "I didn't realise just quite how
successful they are."
John Boland, president of
Maple Capital Management in Montpelier, Vermont said he had put in orders for
about 5,000 Alibaba shares on behalf of high net worth individuals and
institutions and had been told the offer was oversubscribed and that they would
probably not get the full order.
This is
the most anticipated event I've ever seen in my 20-year career on the floor of
the NYSE," said Mark Otto,
partner with J. Streicher & Co, who trades on the NYSE floor. "I think
today's move is sustainable: The company is profitable, unlike some of its
competitors, and it is a way for traders to tap into the Chinese growth
story."
Reference: