Sarah Frier San Francisco
ALIBABA Group Holding surpassed Facebook by market capitalisation on its first trade as a public company.
Alibaba reached $228.5 billion (R2.5 trillion) in market value on Friday after surging 36 percent above its initial public offering (IPO) price to $92.70 a share. The Chinese e-commerce company now trails only Google, Apple and Microsoft in size among US-traded technology companies.
Facebook, the largest social network, first passed $200bn in market value earlier this month and is currently worth about $199.8bn.
Alibaba’s public market debut contrasts with Facebook’s May 2012 sale. Facebook, which was valued at $104bn at its IPO, lost half that in the following months and the stock took more than a year to close above its IPO price.
While Alibaba had risks related to corporate governance and the Chinese government’s unpredictability, that had not stopped investors, Jeff Sica, the chief investment officer at Sica Wealth Management, said.
“There is much more of an ignorance-is-bliss attitude. There’s much more of a feeding frenzy where investors are afraid to miss out on the next big thing,” Sica said. “There’s been hunger built up in the market for Alibaba and they’re ignoring the fact that there are a lot of negative variables.”
Facebook marked its debut on the Nasdaq exchange, where it was plagued with technical glitches on top of investor scepticism about the company’s strategy for making money via advertising on mobile devices.
Facebook’s ascent to $200bn came as it built out its business model. Now the company gets more than half of its advertising revenue from phones, compared with almost nothing at the time of its IPO.
Alibaba raised $21.8bn from the sale, which was the biggest IPO for a tech company. With an IPO price of $68 a share, Alibaba was valued at 29 times expected earnings for the year to March next year – below the multiples fetched by Chinese and American rivals including Tencent Holdings, Baidu and Amazon.com.
Analysts forecast that Alibaba’s earnings would grow 50 percent in financial 2015 from the previous 12 months.
Alibaba’s valuation also eclipsed that of its US-based e-commerce rivals. Amazon is valued at about $153bn, while eBay is worth about $65bn.
Alibaba’s market debut offers investors a public market alternative to Amazon, while giving the Chinese company the cash it needs to expand to countries including the US, where it could potentially compete with Amazon and eBay.
Amazon is the most prominent US-based web retailer, where it has disrupted brick-and-mortar rivals such as Walmart and parlayed its success into cloud computing, smartphones and the delivery of groceries. – Bloomberg