Alibaba finally launched its IPO on Friday, and by the time the day was over there were more billionaires in the world and the company stock was up by 38 percent. The Alibaba story is incredible by any standard, but the fact that this is a company established 15 years ago in China when Internet companies around the world were going bust makes it that much more implausible, but here we are.
Some of the data points from the IPO include:
The company is now worth much more than eBay, Twitter and LinkedIn combined and its offering surpassed Facebook (News - Alert) and General Motors.
The question now becomes is Alibaba worth all that money, and is $93 too much for a company that is established in China, with all the pitfalls that entails? So far the vast majority of experts seem to agree the company was undervalued at $68 and the current price is not too far off from what most were expecting. Based on six published estimates on the stock, the 18 month price target is $88.67 a share which is not too far off from Friday's closing.
Morningstar Inc. has a fair value estimate of $90 per share on Alibaba, and the company’s analyst R.J. Hottovy wrote in a note to clients, “Perhaps learning lessons from Facebook’s IPO, Alibaba’s current pricing range strikes us as conservative, and we do not believe the valuation fully reflects the features that make the wide-moat Alibaba investment story unique.”
Regarding the issue of the company’s structure, many have a wait and see attitude because the company uses a legal structure known as a variable interest entity, or VIE, required by the Chinese government for foreign ownership of certain industries, which includes Internet companies. The revocation of the company's VIE license by the Chinese government could result in consequences many people are not will to contemplate.
Only time will tell what will become of Alibaba, just in case you're interested it is trading under the symbol BABA.