How did Alibaba’s resounding stock market debut compare?
Jack Ma, founder of Alibaba, smiles during the company’s IPO at the New York Stock Exchange on Friday. His share of the company was valued at about $18 billion at Friday’s close.
Alibaba’s stock popped resoundingly during its New York Stock Exchange debut Friday, suggesting that the Chinese online shopping middleman could have raised billions of dollars more during its initial public offering.
Alibaba raised $21.8 billion through the IPO by pricing its shares at $68. But the company’s valuation reached $231.4 billion as shares closed at $93.89 in open trading.
The 38% rise in the price of individual shares shattered the 26% jump recorded on average so far this year in debuts of new Internet and technology stocks in the United States, according to data from Dealogic.
While companies across industries usually seek a one-day pop of about 15% and see an average closer to 9% for massive IPOs, tech stocks have enjoyed bounces on average of more than 20% during the last four years. Back in the dot-com frenzy of the late 1990s, debuts sent stocks soaring an average of 86%.
Undervaluing itself to initial investors ensured that Alibaba would have a strong performance Friday, said Henry Guo, senior research analyst covering Chinese online companies for JG Capital.
Josef Schuster, founder of research and investment firm IPOX Schuster, said it’s also a common phenomenon for Chinese companies to discount themselves and even more so to foreign investors willing to take on the risk of a relatively unknown company.
In exchange for lowering the bar, “the company gets a lot of good taste in investor’s mouths,” he said. Compare that to Facebook two years ago, which saw a lackluster debut, after pushing its IPO price up.
Though Alibaba left money on the table, the analysts said they expect Alibaba to chase after it within months through a secondary offering. For now, Alibaba founder and executive chairman Jack Ma said he plans to use the vast sum the company did collect to expand its network of websites.
The portals link buyers and sellers across the world, primarily in China. By offering advertising, charging commissions and selling fancy tools to sellers, it’s already making more money than Amazon and EBay combined.
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