The Chinese Internet giant Alibaba, which was founded 15 years ago, shocked the stock world on Friday after it started trading far higher than expected, clinching the biggest stock debut in history.
Shares in the firm, created by a Chinese English teacher-turned businessman, began trading at $92.70 a share, well above its IPO price of $68 a share. The stock ended trading at $93.89 a share, a 38 percent gain, giving it a valuation of $231.4 billion, leaving it just below Chevron and just above Procter & Gamble in terms of market value. Facebook was worth a mere $202 billion.
“We have a dream,” said Alibaba founder Jack Ma, as he rang the opening bell to officially launch the flotation on the NYSE. “We hope in the next 15 years the world changes because of us. We hope in 15 years people say this is a company like Microsoft, IBM, Walmart. They changed, shaped the world … We want to be bigger than Walmart.”
The company earned $21.8 billion from its public offering, making it the largest U.S. IPO of all time and further establishing the company as a giant on the world stage, while Ma made him easily the richest man in China. The company is now trading on the New York Stock Exchange under the stock ticker “BABA.”
The founder confessed about an unusual source that inspired him to create the now Chinese Internet titan: “The hero I had is Forrest Gump,” he told CNBC from the floor of the stock exchange. “I really like that guy … Every time I get frustrated, I watch the movie.
“I watched the movie again [before the float] telling me no matter what changed, you are you. I’m still the guy [of] 15 years ago, you know, I only earned like $20 a month. And today I can do [this] much.”
Ma said if he – who, like Tom Hanks’ character, struggled in school – can make it then “80% of the young people in the world can be successful”.
Alibaba is nearly unknown to most Americans but is ubiquitous in China. The company, which operates China’s largest Internet shopping destination, Taobao, and retail site Tmall.com, earned $3.7 billion in the 12 months ended March 31, 2014, up about $2 billion from the prior 12-month period.
“After the IPO, Alibaba will have enough money to buy the coolest and latest innovations to make (it) a true global tech company,” said Simon Chan, a partner in the Hong Kong office of law firm Dorsey and Whitney. “Startup tech companies with cool technologies should be expecting a knock on the door for years to come.”
Alibaba’s public-market debut contrasts with Facebook’s May 2012 sale. Facebook, which was valued at $104 billion 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 has risks related to corporate governance and the Chinese government’s unpredictability, that hasn’t stopped investors, said Jeff Sica, chief investment officer at Sica Wealth Management, Bloomberg reports.