Alibaba Group Holding Ltd’s shares surged by more than 40 percent in their first day of trading as investors rushed to buy them in what looks likely to be the largest IPO in history, lifting the Chinese online retailer’s value to $244bn.
In early trades at the New York Stock Exchange, after the record public share offering, Alibaba leapt from an opening price of $68 to nearly $100 and, while it dropped back, was still up some 38 percent at $94.08 after 10 minutes.
This is the biggest IPO the world has ever seen, so there's a celebratory mood on the floor, whether you like it or not.
The company’s initial public offering, which should be a record 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 $8.2bn for the company after fees for underwriters, and about $13bn for major shareholders.
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 $25bn.
“This is the biggest IPO the world has ever seen, so there’s a celebratory mood on the floor, whether you like it or not,” said Benedict Willis, director of floor operations at Sunrise Securities Corp on the NYSE floor.
Alibaba is nearly unknown to most Americans but is ubiquitous in China, where it is responsible for 80 percent of online sales. The company earned $3.7bn in the 12 months ended March 31, 2014, up about $2bn from the prior 12-month period.
The sale values the company at about $168bn, more than American icons such as Walt Disney Co and Coca-Cola Co. Should the stock close at $90 on its first day, it would be worth about $220bn, nearly the value of Procter & Gamble Co.
Jack Ma, a former English teacher, founded Alibaba in 1999 in his apartment. His personal fortune is more than $14bn 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 $1bn or more in shares. The big increase expected in shares would exceed the gain by US IPOs in the second quarter, which rose an average 9.2 percent in their first day of trading, according to Renaissance Capital IPO Intelligence.