Business

Alibaba’s Debut on Wall Street is Still the Largest IPO in History

September represents an important month for Alibaba. It does not only mark the company’s 20th anniversary and the end of Jack Ma’s era. Five years ago, in September, Alibaba also made its debut on Wall Street with what is still the largest IPO in history

On September 10, Alibaba turned 20 and on the same day, Jack Ma stepped down as chairman of the Chinese company, which in the same month, five years ago, went public on the New York Stock Exchange (NYSE). A debut that is still remembered as the biggest initial public offering (IPO) in history.

The Hangzhou-headquartered giant set many records during its 20-years-long life, some of which remain unbeaten. Alibaba’s raising at $25 billion in its New York IPO is one of them, a record that turned the company into one of Asia’s largest technology firms by valuation.

But many things have changed since Jack Ma founded China’s e-commerce behemoth and since it reached Wall Street.

largest IPO ever - alibaba at the NYSE - cifnews

© 123rf. Before he handed over Alibaba’s reins, Jack Ma has been the face of China’s unstoppable business rise and of the New Retail.

The chairman’s step back from Alibaba marks the end of an era for the firm. After having founded the group twenty years ago and having transformed it into one of the most important online shopping companies in the world, Jack Ma hands over the reins to the CEO Daniel Zhang, following the plan announced a year ago.

In 1999, the visionary English teacher decided to leave his profession in Hangzhou to embark on a Silicon Valley-style adventure. Twenty years later, he is among the richest men in the world with assets of $39 billion, as reported by Forbes. In two decades, he was able to transform what was launched as a startup into a global giant with over $460 billion of market capitalization and about 100,000 staff worldwide, serving over 755 million shoppers.

In particular, the history of Alibaba took a noteworthy quality leap when the company reached Wall Street in 2014. At that time, the e-commerce giant listed the biggest initial public offering by a tech firm to date, which was larger than anything China has ever seen.

Although technology companies traditionally list on NASDAQ, the Alibaba Group Holding Limited (NYSE: BABA) went public at the New York Stock Exchange on September 19th, 2014. A few days after the debut, the company announced that underwriters had exercised an option to purchase additional shares at the IPO price, boosting the total amount raised by the Chinese giant and its selling shareholders from $21.8 billion to $25 billion.

On September 19th, 2014 history was made. Thanks to Alibaba, the largest IPO of all time opened on the New York Stock Exchange. “What we raised today is not money, it’s the trust. It’s the responsibilities that we have,” Jack Ma said of the listing day.

This made it the biggest IPO ever, a record that was previously held by VISA, which raised $19.8 billion in March 2008. In raising $25 billion, Alibaba’s IPO also surpassed the 2010 offering from the Agricultural Bank of China, which raised $22.1 billion in its debut on the Hong Kong Stock Exchange.

Alibaba’s share price opened at $92.7 on Friday, 38% above the $68 IPO price. Although this increase in stock price was lower than the 72.7% increase experienced by Twitter in November 2013, it was still bigger than the growth experienced by AmazonGoogle, and Facebook.

The giant’s start at the NYSE was thus glorious. By Halloween, the company had a bigger market value than Walmart. In November, it racked up record sales on its biggest shopping day of the year, and the stock peaked at $120.

With its share price more than doubling in 2017, Alibaba became the first Asian company to reach the $400 billion market cap in August. In 2018, instead, it became the second Asian firm after Tencent to record a market cap of $500 billion. The Hangzhou company currently has a market capitalization of around $464.38 billion, which is more than double of what it was at its historic IPO.

largest IPO - NYSE - alibaba - cifnews

© Pixabay. Wall Street, New York, USA. Alibaba’s IPO on the NYSE in September 2014 was the largest public offering globally as of July 2019.

But before Alibaba’s debut in the US, it already carried out an initial public offering in Hong Kong in 2007. At that time, the public listing raised 13.1 billion Hong Kong dollars (almost $1.6 billion) but five years later, the Chinese giant decided to take the company private through a de-listing.

The company paid $2.45 billion to buy the 27% of Alibaba held by the public. This equated to HK$13.50 a share, the same offering price for the IPO back in 2007. Jack Ma justified Alibaba’s withdrawal from the Hong Kong Stock Exchange saying that it will allow the company to make long-term decisions free from the pressures that come from having a publicly listed firm.

Nevertheless, some media have recently reported that Alibaba is likely to plan a new listing on the Hong Kong market, currently postponed due to tensions between the special administrative region and Beijing.

According to Bloomberg, after going public in New York, the Chinese e-commerce giant is considering a secondary listing with a potential plan to raise $20 billion in Hong Kong, which would be the city’s second-largest ever after AIA’s.

However, Reuters reported that two people with knowledge of the matter told that Alibaba’s delayed listing in Hong Kong would rise up to $15 billion. While no new timetable has been formally set, according to the sources, Alibaba could potentially launch the deal as early as October, still seeking to raise $10 billion-$15 billion.

Although the deal was initially set to launch in late August, Alibaba still has a number of reasons for sticking with its plan to list its shares in the country. Hypothetically, in the longer term, the Trump administration could become even tougher toward Chinese companies raising money in the United States. A fact that could put Alibaba’s New York listing in a difficult position.

On the contrary, going public in Hong Kong would mean coming back home for the Hangzhou company and, therefore, represent an example of China’s growing power. Asked about Alibaba’s potential listing, Hong Kong stock exchange CEO, Charles Li, said “I am confident that companies like that ultimately will find a home here because this is home and I think they will come. I don’t know when though.”

Nevertheless, Alibaba’s possible listing on the Hong Kong market is just one of the future challenges for the company and its new president. After twenty years of successes and records, the e-commerce firm is now ready to start a new era as a giant in the global space.

largest IPO - Alibaba - Hong Kong stock exchange - cifnews

© Unsplash. Man Cheung Street, Hong Kong. Although it is not new to the HK Stock Exchange, Alibaba plans to list its shares in this international financial center.

For what concerns Jack Ma, instead, the founder will continue to remain in the company as a lifetime member of the Alibaba Partnership – the group of 36 people who elect the majority of the board of directors. Moreover, the former chairman also holds 6.2% of the company’s shares and, therefore, still has strong decision-making power.

When he announced his retirement one year ago, Ma also expressed his intention to return to education and philanthropy. Indeed, in the same year that the e-commerce giant went public on the NYSE, Alibaba’s former president also founded the Jack Ma Foundation, an organization dedicated to the dissemination and promotion of educational systems in rural China.

Jack Ma, who started Alibaba in his one-bedroom apartment in Hangzhou, had the dream to make his company “bigger than Walmart” and thus be able to change the world through it.

Alibaba has shifted from an e-commerce company into an entire digital economy, with businesses and affiliates covering every aspect of the user’s daily life from online shopping, payments, and logistics to entertainment, local services, and brick-and-mortar retail. And with innovations such as New Retail, Jack Ma’s company is truly changing the way people shop, not just in China but around the world as the company continues to globalize.

Therefore, not only Alibaba’s IPO on the NYSE remains unbeaten but its history will be always remembered as extraordinary.

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