In June it was revealed that Alibaba had chosen the NYSE to list their record setting IPO. They expected to raise as much as $20 billion, becoming the largest US Initial Public Offering, not on the stock exchange that was once considered the go-to for tech companies.
As it turns out, their opening was even better than expected. Stocks opened at $68 and ended the day at $93.89. The opening price means that the company actually raised $21.8 billion, almost 10% higher than they had hoped. This is great news for the company, especially after the rather rocky time companies have had with IPOs in the past few years. Groupon failed pretty miserably in 2011, Facebook had its issues in 2012, whereas LinkedIn had major successes in 2012 and Twitter had mixed results in 2013.
So, with Alibaba technically being a Chinese-based company, why is all of this important? Well, it has to do with US filing and market capitalization. At its initial price, Alibaba's corporate value was $168 billion. All of the other US IPOs in 2014 combined have a market capitalization of $180.5 billion. With a single IPO, the new IPO capitalization for 2014 nearly doubled.
Not all companies going public for the first time are large, so let's take a look at existing companies' values. One of the companies that best relates to Alibaba is Amazon; the big difference being that Amazon sells directly to consumers, whereas Alibaba is more about pairing up wholesalers and distributors. Also, Amazon has aspects of their business, such as Amazon Web Services, Instant Video, etc. Amazon's current market cap is $158.3 billion - lower than the initial value of Alibaba by their entire IPO value. If you take into consideration current market value, there is more than a $50 billion discrepancy.
Another Chinese company listed in the US is Baidu, the Chinese Google, or so they believe. With everything from search to advertising and even a mobile operating system, Baidu has everything they need to be Google, and are even in the same physical market as Alibaba. So, how do they compare? A market cap of only $78.86 billion. That is about a third of Alibaba, which has far less to offer overall. Apparently it really pays to be in the right business, not every business.read more...