Alibaba shares rise sharply in Wall Street debut

//Alibaba shares rise sharply in Wall Street debut

Alibaba shares rise sharply in Wall Street debut

Alibaba priced its initial public offering at $ 68 a share, the top end of the expected range, raising $ 21.8 billion last night, in the latest sign of strong investor appetite for the Chinese e-commerce giant. 

At that price, the IPO, one of the largest-ever, would give Alibaba a market valuation of $ 167.6 billion, surpassing US corporate icons from Walt Disney to Boeing. 

The offering also vaults it above US e-commerce rivals like Amazon and eBay and gives it more financial firepower to expand in the US and other markets. 

An Ipsos poll conducted for Thomson Reuters found that 88% of Americans had never heard of the Chinese e-commerce company.

It is responsible for 80% of online sales in the world’s second largest economy and works with a number of businesses there including consumer online marketplace Taobao and payment service Alipay. 

But that did not sap enthusiasm among multiple large US institutions, including Blackrock, which put in orders for allocations of at least $ 1 billion in shares, according to the sources. 

Between 35 and 40 institutions placed orders for $ 1 billion or more shares each, investors briefed on the matter said. 

Keen to buy into China’s rapid growth and evolving Internet sector, investors have been clamouring to get shares since top executives at Alibaba, including CEO Jack Ma, kicked off the road show last week. 

Based on the amount raised so far, Alibaba’s IPO is the third-largest ever behind Agricultural Bank of China’s record $ 22.1 billion listing in 2010 and ICBC’s $ 22 billion flotation in 2006.

If underwriters exercise an option to sell more shares, as many expect, Alibaba’s will surpass both Chinese lenders to become the largest-ever. 

Alibaba and certain other shareholders also granted underwriters a separate 30-day option to buy up to an additional 48 million shares. 

Many investors reported difficulty in getting the full allocation of shares they were aiming for. 

Alibaba’s revenue surged 46% in the April to June quarter on strong gains in its mobile business, with net income attributable to its shareholders nearly tripling to $ 1.99 billion, or 84 cents a share. 

Ma, who founded the company in a one-bedroom apartment, will have a paper fortune worth some $ 14 billion, vaulting him into the ranks of tech billionaires like Bill Gates and Jeff Bezos. 

The deal is also expected to make millionaires out of a substantial chunk of the company’s managers, software engineers and other staff. 

In addition, it allows cornerstone Alibaba investors like Japan’s Softbank and Yahoo to profit from their foresight in getting in on the ground floor at the e-commerce giant. 

Yahoo is selling some $ 8 billion worth of shares in the offering, leaving it with a 16.3% stake. Softbank is not selling for now and will be left with a 32% stake, making it the largest single shareholder. 

The successful IPO sets the stage for Alibaba shares to make their debut on the New York Stock Exchange today, with many investors and analysts betting that there is still room for a substantial first-day jump in the shares. 

Other big Chinese Internet stocks have performed well in US markets, including Baidu, whose shares rocketed 354% on their first trading day in 2005. 

Alibaba is selling 320 million shares, equivalent to about 13% of the company’s capital. Nearly two thirds of those shares are being sold by existing shareholders including Ma, who will reap $ 867m.

RTÉ News – Business Headlines

By | 2014-09-20T00:07:55+00:00 September 20th, 2014|Business|0 Comments