Alibaba shares soar in stock market debut - UPDATE
The Alibaba Group started trading at $92.70 per share on the New York Stock Exchange (NYSE), sharply higher than the $68 per share at which it had been priced.
The latter of those two prices already converted the Chinese outfit into the largest public offering ever.
Founded 15 years ago by a former teacher in his one bedroom apartment, the group was expected to raise $21.8bn and give the company a market capitalisation of $168bn, amounting to $18bn more than e-commerce giant, Amazon.
The company’s expected share pricing range jumped from an initially modest minimum of $60 to the confirmed $68 per share, at the very top of the expected range.
S&P Capital IQ has reported that The Alibaba Group can be officially named as of the 40 biggest public companies in the world. The group is expected to begin trading on the New York Stock Exchange at 9:00 EST on Friday.
The Alibaba Group has holdings in several sectors, including Chinese e-commerce sites, online payment systems, Chinese social networking and video upload sites and a Chinese football club.
Some analysts are confident that the confirmed price for Alibaba shows great promise. Tony Ursillo, analyst at Loomis Sayles, claimed that he was, “surprised that [the shares] didn’t go higher given how much demand there seems to be”. The analyst continued, “most people who are involved think it is worth a lot more than $68.”
The Wall Street Journal also shared Ursillo’s enthusiasm for the investment, reporting that many felt that the confirmed price would allow stock prices to rise on the open market.
Alibaba currently dominates the e-commerce market in China and is set to expand aggressively abroad. However, some academics and investors have raised concerns over the company’s long term potential, claiming that the set IPO price makes the investment highly risky.
Although Alibaba’s business prospects may look solid from some perspectives, uncertainty is still prevalent in the overall expert consensus, as the investment shows considerable political risk. Richard Waters, business and technology writer for The Financial Times, has reported that future changes in Chinese regulations are likely to occue, which would force changes upon Alibaba’s licences, causing adverse knock-on effects to shareholders.
Other alarms have been raised over the company’s current corporate governance structure. The firm partially operates through a series of variable interest entities in China, owned by senior executives and founder, Jack Ma. This means that investors purchasing the group’s shares are effectively buying a stake in a company registered in the Cayman Islands, which has a contract to share in Alibaba’s profit.
Typically, firms heading to float on the stock market would usually restrict current investors from making share sales immediately after an IPO. However, early investors in Alibaba, who currently hold a total of $8bn of stock, will not be held to any such lock up agreement.
According to Adam Perlaky, chief strategist at New Albion Partners, this means that stock prices may move upwards almost immediately after the bell sounds, giving the un-locked early investors a great opportunity to sell.