Group Holding Ltd (阿里巴巴) debuted as a publicly traded company on Friday and swiftly climbed nearly 40 percent in a mammoth IPO that offered eager investors seemingly unlimited growth potential and a way to tap into the burgeoning Chinese middle class.
The sharp demand for shares sent the market value of the e-commerce giant soaring well beyond that of Amazon.com Inc, eBay Inc and even Facebook Inc. The initial public offering was on track to be the world’s largest, with the possibility of raising as much as US$25 billion.
Jubilant CEO Jack Ma (馬雲) stood on the floor of the New York Stock Exchange as eight Alibaba customers, including an American cherry farmer and a Chinese Olympian, rang the opening bell.
“We want to be bigger than Wal-Mart,” Ma told CNBC. “We hope in 15 years, people say this is a company like Microsoft, IBM, Wal-Mart. They changed, shaped the world.”
The company’s online ecosystem stands apart from most e-commerce rivals because it does not sell anything directly, preferring to connect individuals and small businesses. It enjoyed a surge in US popularity over the past two weeks as executives made sales pitches based on Alibaba’s strong revenue and big ambitions.
Trading under the ticker “BABA,” shares opened at US$92.70 and hit nearly US$100 within hours. By the end of the day, the stock rose US$25.89, or 38 percent, to close at US$93.89.
The rise also lifted Ma’s personal net worth to some US$17 billion, making him the richest person in China, according to Forbes magazine.
Some institutional investors, such as banks or hedge funds, were able to buy the stock at US$68 per share, the amount set on Thursday evening. Most other investors had to wait until shares started trading publicly, which meant paying a much higher price after adjustments for demand.
Alibaba made a profit of nearly US$2 billion on revenue of US$2.5 billion in the quarter ending June 30. The company’s Taobao.com (淘寶), Tmall.com (天貓) and other platforms account for some 80 percent of Chinese online commerce.
Online spending by Chinese shoppers is forecast to triple from its 2011 size by next year. Beyond that, Alibaba has said it plans to expand into emerging markets and, eventually, into Europe and the US.
The company does not compete with its merchants or hold inventory, serving instead as a conduit that links buyers and sellers of all kinds.
“The business model is really interesting. It’s not just an eBay. It’s not an Amazon. It’s not a Paypal. It’s all of that and much more,” Georgetown University professor Reena Aggarwal said.
The company earlier this year announced plans for a US marketplace called 11 Main, which is currently in a test phase.
Ma told Bloomberg television on Friday that he has more plans for the US market.
Asked if he would consider a partnership with Amazon, Ma said, “I would be interested in talking [with] anybody ... involving helping small businesses.”
Friday’s closing price gave the company a value of US$231.44 billion, compared with US$150 billion for Amazon and US$67 billion for eBay.
The IPO easily eclipsed the US$16 billion Facebook raised in 2012, the most for a technology IPO. If all of its underwriters’ options are exercised, Alibaba would also top the all-time IPO fundraising record of US$22.1 billion set by the Agricultural Bank of China Ltd (中國農業銀行) in 2010.
Yet the track record for Chinese stocks in general does not inspire confidence. Over the last two decades, they have earned a reputation for burning investors in both the US and China. Many of those that do post gains fail to keep pace with inflation. Returns have been depressed by a range of factors, including fraud allegations, questionable accounting and cumbersome regulations.
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.
A US government panel has warned of risks to investors because of a complex corporate structure. Alibaba is registered in the Cayman Islands and controlled by a partnership through a series of shell companies.
Additional reporting by AFP
Polytronics Technology Corp (聚鼎科技) yesterday announced that it is buying Henkel AG’s thermal clad dielectric material (TCLAD) business division for US$26 million as the Taiwanese firm aims to improve its technology, product portfolio and revenue performance. Polytronics, headquartered in the Hsinchu Science Park (新竹科學園區), is a supplier of protection components and heat dissipation materials. The firm entered the metallic heat-dissipation substrate market in 2007 and developed a unique solventless production process. Its board of directors approved signing an agreement with Henkel to acquire the German chemical firm’s TCLAD division in the US. The purchase includes all assets and business interests, including equipment,
SIZE MATTERS: Medium-sized hotels that do not have the support of parent groups are more vulnerable and are forced to take action, a REPro Knight Frank researcher said About 50 hotels across Taiwan are seeking to exit the market as they succumb to the bleak business outlook amid international travel restrictions imposed to combat the COVID-19 pandemic. Yomi Hotel (優美飯店) on Minsheng E Road, Sec 1, in Taipei is seeking to transfer ownership with an asking price of NT$950 million (US$32.15 million) and a pledge for a lease contract that guarantees a 3 percent return. The budget hotel, with room rates that start from NT$1,400 per night, maintains normal operations, but has been struggling since March, when the government placed restrictions on inbound and outbound travel. Occupancy rates for hotels in
‘SENSITIVE MARKETS’: The previously unannounced project would involve the company handing over control of data to a third party to sidestep privacy concerns Google has abandoned plans to offer a major new cloud service in China and other politically sensitive countries due in part to concerns over geopolitical tensions and the COVID-19 pandemic, two employees familiar with the matter said, revealing the challenges for US tech giants to secure business in those markets. In May, the search giant shut down the initiative, known as “Isolated Region” and which sought to address nations’ desires to control data within their borders, the employees said. The action was considered a “massive strategy shift,” said one of the employees, who added that Isolated Region had involved hundreds of employees
GOGOROS TO GO: The scooter maker’s CEO said that the electric vehicles ‘are the perfect complement to a program designed to stimulate the Taiwanese economy’ Minister of Economic Affairs Wang Mei-hua (王美花) yesterday announced a draw to encourage people to claim their Triple Stimulus Vouchers digitally. The prizes include movie tickets and 25 electric scooters donated by Gogoro Inc (睿能創意), Wang said. The Ministry of Economic Affairs said that it would hold a scooter draw every day for the next 10 days, beginning yesterday, after which there would be a draw every week for 15 weeks. The first winner was a Taiwan Cooperative Bank (合庫銀行) credit card user, the ministry said. The benefits of claiming the vouchers digitally extend beyond the draws, with many businesses offering special deals for