|
 It was an auspicious debut for the Chinese e-commerce company, which
was founded by Jack Ma in his apartment in 1999 and now accounts for
80 percent of online sales in China.
About 100 people gathered outside the New York Stock Exchange at
Wall and Broad Streets, many of them Chinese tourists with cameras,
and they cheered and snapped photos when Ma exited the building with
the kung fu star Jet Li.
The stock opened at $92.70 shortly before noon ET 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 <TWTR.N> first day last year, although still short of
volume for the General Motors Co <GM.N> and Facebook Inc <FB.O>
IPOs.
"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."
The pricing of the IPO on Thursday initially raised $21.8 billion
for Alibaba. Scott Cutler, head of the New York Stock Exchange's
global listing business, told CNBC that underwriters would exercise
their option for an additional 48 million shares, to bring the IPO's
size to about $25 billion, making it the largest initial public
offering in history.
But a source close to the matter said the underwriters would make a
final decision on whether to exercise the option over the next week
or two, based on how the shares trade over the next few sessions.
Alibaba is nearly unknown to most Americans but is ubiquitous in
China. The company, which operates China's largest Internet shopping
destination, Taobao, and retail site Tmall.com, earned $3.7 billion
in the 12 months ended March 31, 2014, up about $2 billion from the
prior 12-month period.
At its closing share price on Friday, Alibaba has a market value of
$231 billion, exceeding the combined market capitalizations of
Amazon <AMZN.O> and eBay <EBAY.O>, the two leading U.S. e-commerce
companies.
Alibaba is valued at 39 times its estimated earnings per share for
its current fiscal year, which ends in March. That is right in line
with Facebook's <FB.O> valuation of 39 times forward earnings but
nowhere near the lofty valuation of Amazon.com's <AMZN.O> multiple
of 264, according to Thomson Reuters Starmine data.
TRYING TO CHART THE STOCK'S FUTURE
The future path of Alibaba's shares is truly uncharted territory.
"It's very difficult to predict," said Stephen Massocca, managing
director at Wedbush Equity Management LLC in San Francisco. "Is it
going to trade based upon its true fundamental value, or is it going
to become one of these cult stocks a la Tesla or Solar City, or some
of these names where there really isn't a fundamental grounding to
the valuation?
"And it's very difficult to see what bucket these guys are going to
fall into," Massocca added. "My guess is there's a very high
likelihood it does fall into this bucket, which would lead you to
believe it does trade higher. But if you were to base it on a
fundamental valuation, I would call it slightly overvalued at this
price."
Morningstar analyst RJ Hottovy said that while he expected Alibaba
to further grow revenues, it was entering an aggressive new
investment stage that would likely pinch margins over the next
couple of quarters.
Ma, a former English teacher who is now the company's executive
chairman, boasts a personal fortune of more than $14 billion on
paper, vaulting him into the ranks of such tech billionaires as Bill
Gates and Jeff Bezos. The deal is also expected to make millionaires
out of a substantial chunk of Alibaba's managers, software engineers
and other staff.
The rise in the stock exceeds the average gain by new IPOs on U.S.
exchanges of late. In the second quarter, the average first-day gain
was 9.2 percent, according to Renaissance Capital IPO Intelligence.
Underwriters usually aim for a gain of 10 percent to 15 percent on
the first day.
[to top of second column] |
Twitter last year saw its shares surge 73 percent on their first
trading day
Demand was intense among retail investors. J.J. Kinahan, chief
market strategist at retail brokerage TD Ameritrade Holding Corp
<AMTD.N>, said the company received customer orders amounting to
about 70 percent of what it saw for Facebook and about three times
the customer orders it had for Twitter's IPO.
Assuming underwriters elect to sell additional shares, the company's
initial public offering will become the largest in history,
surpassing listings by Agricultural Bank of China Ltd's <601288.SS>
in 2010 and by ICBC <601398.SS>, another Chinese lender, in 2006.
WHAT HAPPENED IN HONG KONG
Alibaba Group's orange banners were festooned around the exchange,
with its logo on NYSE computer screens. Ma watched several long-time
customers ring the opening bell at 9:30 a.m.
"I don't want disappointed shareholders, I want to make sure they
make money," Ma said of the pricing, on CNBC, adding that he worries
most about keeping customers happy.
Similar euphoria greeted Alibaba.com when its stock debuted on the
stock exchange in Hong Kong in November 2007 on the eve of the
global financial crisis. The stock more than tripled on day one, but
five years later Ma delisted the company at the IPO price after
failing to impress investors.
The NYSE held extensive tests ahead of the hotly anticipated
offering to ensure it would be able to handle heavy trading volume.
A call on Friday with periodic updates on order matching and trading
continued until about noon ET.
"We've had a lot of major IPOs, and when you have one it's always
the biggest until the next biggest one comes along," said Ted
Weisberg, floor trader with Seaport Securities in New York, who has
been a member of the NYSE for 45 years.
The deal allows cornerstone Alibaba investors such as Japan's
Softbank Corp <9984.T> and Yahoo Inc <YHOO.O> to profit from getting
in on the ground floor at the company. Yahoo sold some $8 billion
worth of shares in the offering, leaving it with a 16.3 percent
stake. Shares of Yahoo were hit on Friday, dropping 2.7 percent.
Softbank is not selling for now and will be left with a 32 percent
stake, making it the largest single shareholder.
In a measure of the mystique the Alibaba name carries with
investors, shares in advertising company Chinanet Online Holdings
Inc <CNET.O> soared 92 percent to $1.96 after it announced
discussions were under way with Alibaba to offer digital advertising
services to its online shopping site Taobao.
(Reporting by Liana Baker, Ryan Vlastelica and Jessica Toonkel;
additional reporting by Caroline Valetkevitch; writing by David
Gaffen and Dan Wilchins; Editing by Steve Orlofsky and Leslie Adler)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright
2014 Reuters. All rights reserved. This material may not be
published, broadcast, rewritten or redistributed.
 |
