Alibaba shares surge 46 per cent in their debut

September, 19th 2014

New York: Alibaba Group Holding Ltd’s/sshares rose as much as 46 per cent in their first day of trading on Friday, lifting the Chinese online retailer’s value to $244 billion.

The company’s initial public offering, on track to be the biggest ever if underwriters exercise their option to sell more shares, will help fund Alibaba’s expansion in the United States and elsewhere.

The sale raised more than $8.2 billion for the company after fees for underwriters, and about $13 billion for major shareholders.

Alibaba’s shares were trading at $99 on the New York Stock Exchange at 11:58am. ET, versus the IPO price of $68.

The pricing on Thursday initially raised $21.8 billion for the Chinese e-commerce company. Scott Cutler, head of the New York Stock Exchange’s global listing business, told CNBC that underwriters would exercise their option for an additional 48 million shares, to bring the IPO’s size to about $25 billion, making it the largest IPO in history.

“This is by far the biggest IPO event-extravaganza that we’ve had,” said Peter Costa, floor trader at Empire Executions Inc.

Alibaba is nearly unknown to most Americans but is ubiquitous in China, where it is responsible for 80 per cent of online sales. The company earned $3.7 billion in the 12 months ended March 31, 2014, up about $2 billion from the prior 12-month period.

Jack Ma, a former English teacher, founded Alibaba in 1999 in his apartment. His personal fortune is more than $14 billion on paper, vaulting him into the ranks of such tech billionaires as 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.

Alibaba’s shares met with intense demand from investors, with 35 and 40 institutions each placing orders for $1 billion or more in shares. The big increase expected in shares would exceed the gain by U.S. IPOs in the second quarter, which rose an average 9.2 per cent in their first day of trading, according to Renaissance Capital IPO Intelligence.

Mark Hawtin, portfolio manager of the GAM Star Technology Strategy, a portfolio for offshore investors, said he was excited about how Alibaba priced and was hoping to buy more shares at the open. However, he and number of other investors suggested they were less interested in buying above $90 a share.

One institutional investor who had been told he was going to get one of the top allocations only received one-third of his order, said he was told everyone is disappointed. “I have cooled off now,” he said.

“We did put in for the IPO and we are getting an allocation, though not the full allocation we put in for. We probably got about 10 per cent of that,” said Michael Matousek, head trader at U.S. Global Investors Inc in San Antonio.

J.J. Kinahan, chief market strategist at retail brokerage TD Ameritrade Holding Corp, said the company received customer orders amounting to about 70 per cent of what it saw for Facebook, and about three times the customer orders it had for Twitter’s IPO.

Alibaba Group’s orange banners were festooned around the exchange, with its logo on NYSE computer screens. Ma was on hand at the trading floor to watch several long-time customers ring the opening bell at the exchange.

“I don’t want disappointed shareholders, I want to make sure they make money,” Ma said of the pricing, on CNBC, adding that he worries most when customers are happy.

With underwriters electing to sell more shares, the company’s initial public offering becomes the largest in history, surpassing Agricultural Bank of China Ltd’s/s$22.1 billion listing in 2010.

NYSE held extensive tests to ensure it would be able to handle heavy trading volume and kept a call going on Friday with periodic updates to note the indicated price range and to say that systems were working properly.

Alibaba chose the NYSE over rival exchange operator Nasdaq OMX Group Inc to list its shares in part because it worried about Nasdaq’s ability to handle a massive IPO after Facebook Inc’s botched market debut in 2012.

Source: Gulfnews.com