Alibaba IPO is the World’s Biggest Ever

Alibaba’s listing on the New York Stock Exchange is now the biggest ever. Priced at $68, the IPO initially raised $21.8 billion for the Chinese company surpassing Visa’s 2008 IPO ($17.8 billion) and Facebook’s 2012 IPO ($16 billion) but just shy of the record set by Agricultural Bank of China Ltd in 2010 ($22.1 billion).

Due to strong investor demand, underwriters exercised an option to release 48 million additional shares bringing the IPO to $25 billion — the largest in history.

Alibaba stock closed at $93.89 on its first day of trading, up 38% from its IPO price. At these prices levels, Alibaba’s market capitalization is already larger than blue chips like IBM, Oracle, Bank of America and Coca-Cola.

The e-commerce giant already processes more volume of merchandise than Amazon and eBay combined. Alibaba’s network of sites like Taobao, Tmall, Alipay and Alibaba.com dominates 80% of e-commerce in China as the country’s middle class and Internet usage continues to grow. Despite its size, Alibaba is still growing at breakneck pacerevenue in the first quarter this year grew 38% year-on-year and the second quarter grew 46% year-on-year.

One company that’s benefiting from Alibaba’s historic IPO is Yahoo which owned 22.6% of Alibaba pre-IPO. In a regulatory filing, Yahoo sold 140 million shares in the IPO netting itself $9.4 billion in cash.

We talked about Yahoo and the Alibaba IPO on radio back in April and June as we discussed how Yahoo’s stake in Alibaba was a way to invest in Alibaba pre-IPO. Yahoo stock has returned 158% in two years leading up to Alibaba’s IPO.

yhoo-chart

Chart: Yahoo Finance

We’ll be sharing a case study on our analysis and investment in Yahoo soon, while Investment Quadrant members will receive a video case study as well. Do watch out for that!

Adam Wong is the editor-in-chief of The Fifth Person and author of the national bestseller Lucky Bastard! which made the Sunday Times Top 10 Bestseller's List in 2009 and Value Investing Made Easy which made the Kinokuniya Business Bestseller's List in 2013. In 2010, he appeared on U.S. national television on the morning show The Balancing Act. An avid investor himself, Adam shares his personal thoughts and opinions as he journals his investing journey online.

9 Comments

  1. anonymous

    September 23, 2014 at 5:02 pm

    What do you think of Alibaba being a non net-cash company with Total Debts @Jun2014 of CNY68bil (ST Debt CNY13bil, LT Debt CNY49bil, MI CNY5bil) agst Total Cash of CNY60bil (Cash CNY52bil, ST investments CNY8bil), and its debt/equity of 100%? I don’t know if there’s any off-BS liabilities, as I don’t have access to its annual reports.
    I know with a 3yr avg revenue growth of 155%, 3yr avg net income growth of 219%, a growing cash pile & media hype about bigger & better things to come for this company, its high debt ratio looks to be acceptable. But if it goes on its acquisition spree and the high debt ratio is not reduced, would you be concerned or it still does not matter to you because of its expected high growth trajectory?
    Am asking this question because to date, I can’t find any opinions on its high debt ratio. So am interested to hear your opinion. Thanks in advance for your reply.

    • Adam Wong

      September 23, 2014 at 10:00 pm

      Hey there!

      I personally wouldn’t invest in Alibaba at this moment. Sure, there’s a ton of hype but like you said, as with most IPO stocks, there’s not enough information about its fundamentals to make a fully informed decision.

      Getting a slice of the Alibaba IPO through Yahoo was a great play in my opinion. Yahoo was trading sub 20 two years ago and with the general consensus that Alibaba’s market cap was going to be at least $100 billion after IPO, it made Yahoo seriously undervalued then.

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