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
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