Alibaba’s record IPO debuts at $92.7

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September 20, 2014

By raising as much as $25 billion, Chinese online giant Alibaba is poised to break the record for the largest initial public offering in history

September 20, 2014

By raising as much as $25 billion, Chinese online giant Alibaba is poised to break the record for the largest initial public offering in history

New York: Alibaba made its long-awaited Wall Street debut on Friday, under the symbol “BABA" on the heels of a record stock offering that opens the door to global expansion for the Chinese online retail giant.

The Chinese company's shares opened at $92.7 at the NYSE, after the IPO was priced at $68. Following the open, shares moved slightly higher in brisk trading.

Company founder Jack Ma was on the floor of the New York Stock Exchange as trading opened, while a group of Alibaba customers rang the opening bell.

$25-b IPO

By raising as much as $25 billion, Chinese online giant Alibaba is poised to break the record for the largest initial public offering in history.

Priced at $68 a share, Alibaba would raise $21.7 billion with the offering of 32 crore shares. If underwriters exercise the option for 4.8 crore additional shares, the amount would top $25 billion, breaking the 2010 record set by China’s AgBank.

Many investors seeking Alibaba stock got shut out in the initial public offering Thursday. More than 1,700 investors worldwide put in orders for Alibaba shares, according to people familiar with the matter. About half of them got no stock, the people said. A majority of the shares were sold to US investors, they said.

Meanwhile, 25 investment firms were sold about half of the stock in the IPO, people familiar with the deal said. That’s unusually concentrated for a deal of this size, said a banker familiar with the process.

Yahoo is selling some $8 billion worth of shares in the offering, leaving the company with a 16.3 per cent stake. Yahoo’s remaining stake in Alibaba is worth $27.32 billion at the Chinese company’s IPO price.

Speaking to CNBC television from the trading floor, Ma said he was “very honoured, and so excited” by the market debut and that he sees enormous growth potential for Alibaba.

“We have a dream,” he said. “We hope in the next 15 years the world will change. We want to be bigger than Walmart.”

He added that he sees Alibaba as a company that will have a huge impact: “We hope people say in 15 (years) this is a company like Microsoft, like IBM.”

Analysts upbeat

Some analysts were also upbeat about Alibaba, which dominates the Chinese online retail space with Taobao.com and TMall.com.

“Alibaba has become the biggest e-commerce firm in the world in terms of gross merchandise volume,” the research firm Trefis said, setting a target price of $80 a share.

“Alibaba will continue to retain the mammoth share of online shoppers, even if it is not able to increase it much.”

“While the stock is not cheap, we believe the company’s outsized growth and margin profiles, if sustained, should support higher valuation over time.”

The IPO allows investors to get a piece of the huge Chinese market, but it also will fuel Alibaba's international ambitions.

Alibaba’s consumer services are similar to a mix of those offered by US Internet titans eBay, PayPal and Amazon, and it also operates services for wholesalers.

The company earlier this year announced plans for a US marketplace called 11 Main, which is currently in a test phase.

Alibaba Group made a profit of nearly $2 billion in the quarter ending June 30. Revenue rose 46 per cent from the same period a year earlier.

Alibaba decided to list in New York because it wanted an alternative class share structure to give selected minority shareholders extra control over the board; the Hong Kong bourse declined to change its rules to allow this.


Courtesy: Agencies

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