Alibaba surges 38% in trading debut, now valued at US$231 billion

Founder and executive chairman of Alibaba Group Jack Ma celebrates as the Alibaba stock goes live during the company's initial public offering at the New York Stock Exchange on September 19, 2014 in New York City. Alibaba shares vaulted higher i
Founder and executive chairman of Alibaba Group Jack Ma celebrates as the Alibaba stock goes live during the company's initial public offering at the New York Stock Exchange on September 19, 2014 in New York City. Alibaba shares vaulted higher in their Wall Street debut Friday, amid a wave of optimism over the prospects for the Chinese online retail giant. -- PHOTO: AFP

NEW YORK (AFP, REUTERS) - A buying frenzy sent Alibaba shares sharply higher Friday as the Chinese online giant made its historic Wall Street trading debut.

Alibaba leapt from an offering price of US$68 to US$92.07 in the first trades, then headed to nearly US$100 before settling back at the close to US$93.89 - a hefty gain of 38 per cent that gives it a market value of US$231 billion (S$292 billion), exceeding the combined market capitalisations of Amazon and eBay, the two leading US e-commerce companies.

Company founder Jack Ma was on the floor of the New York Stock Exchange before trading opened, while a group of Alibaba customers rang the opening bell.

By raising as much as US$25 billion (S$31 billion), Chinese online giant Alibaba is poised to break the record for the largest initial public offering in history.

Priced at US$68 a share, Alibaba has raised US$21.7 billion with the offering of 320 million shares.

If underwriters exercise the option for 48 million additional shares, the amount would top US$25 billion, breaking the 2010 record set by China’s AgBank of US$22.1 billion.

Speaking to CNBC television from the trading floor, Ma said he was “very honoured, and so excited” by the market debut and that he sees enormous growth potential for Alibaba.

“We have a dream,” he said. “We hope in the next 15 years the world will change. We want to be bigger than Wal-Mart.”

He added that he sees Alibaba as a company that will have a huge impact: “We hope people say in 15 (years) this is a company like Microsoft, like IBM.”

Some analysts were also upbeat about Alibaba, which dominates the Chinese online retail space with Taobao.com and TMall.com.

“Alibaba has become the biggest e-commerce firm in the world in terms of gross merchandise volume,” the research firm Trefis said, setting a target price of US$80 per share.

“Alibaba will continue to retain the mammoth share of online shoppers, even if it is not able to increase it much.”

Youssef Squali at Cantor Fitzgerald recommending buying Alibaba.  Alibaba “starts trading today and with it comes the opportunity to invest in China’s largest e-commerce platform, which we believe has the potential to dominate global online commerce over time,” the analyst said in a note to clients.

“While the stock’s not cheap, we believe the company’s outsized growth and margin profiles, if sustained, should support higher valuation over time.”

The IPO allows investors to get a piece of the huge Chinese market, but it also will fuel Alibaba’s international ambitions.

Alibaba’s consumer services are similar to a mix of those offered by US Internet titans eBay, PayPal and Amazon, and it also operates services for wholesalers.

The company earlier this year announced plans for a US marketplace called 11 Main, which is currently in a test phase.

Alibaba Group made a profit of nearly US$2 billion on revenue of US$2.5 billion in the quarter ending June 30.

Revenue rose 46 per cent from the same period a year earlier.

Alibaba decided to list in New York because it wanted an alternative class share structure to give selected minority shareholders extra control over the board; the Hong Kong bourse declined to change its rules to allow this.

A US government panel has warned of risks to investors because of a complex corporate structure.

Alibaba is registered in the Cayman Islands and controlled by a partnership through a series of shell companies.

The IPO is also a major event for US-based Yahoo, which bought a 40 per cent stake in the Chinese online giant in 2005 for US$1 billion and still holds 22.4 per cent.

The California company is expected to walk away with close to US$10 billion by paring that stake down to 16.3 per cent.