infoTECH Feature

September 23, 2014

Alibaba: Up by 38 Percent in its First Day of Trading

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:

  • Current price stock price is $93.90 which was a 38.1 percentage change
  • Jack Ma the Co-founder and chairman of the company has stock shares valued at $18.2 billion
  • Joseph Tsai Co-founder and vice chairman is at $7.4 billion
  • Yahoo, who invested $1 billion in 2005, will get $37.7 billion
  • SoftBan, a Japanese telecom reaps the biggest reward at $74.9 billion
  • Alibaba left more than $8 billion on the table, making it the only company to leave that much on the table after a deal

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.




Edited by Alisen Downey
FOLLOW US

Subscribe to InfoTECH Spotlight eNews

InfoTECH Spotlight eNews delivers the latest news impacting technology in the IT industry each week. Sign up to receive FREE breaking news today!
FREE eNewsletter

infoTECH Whitepapers