Although 88 percent of Americans don't have an idea who or what Alibaba Group Holding is, this didn't prevent the company from pricing its initial public offering at $68 per share, raking in $21.8 billion to become one of the largest IPOs in the country.
By picking a price at the top end of the assumed range, Alibaba surpassed big American companies like the Walt Disney Co. and Boeing Co., leaving behind as well e-commerce rivals such as eBay and Amazon. With that kind of financial power, the company has the support it will need to expand into the United States as well as other markets.
In terms of scale, profitability, and growth prospects, ChannelAdvisor CEO Scot Wingo puts Alibaba in the same class as Google and Facebook. This is not surprising given the Chinese e-commerce company accounts for 80 percent of Internet sales in the second-largest economy in the world.
The amount Alibaba has so far raised puts it in third spot for the largest IPOs in the U.S. Top spot is still maintained by the Agricultural Bank of China Ltd. with $22.1 billion in 2010, while the second-largest IPO is the Industrial and Commercial Bank of China's (ICBC) $22 billion flotation from 2006.
However, underwriters have the option to sell more Alibaba shares. If they do, the company will surpass both the Agricultural Bank of China and ICBC to become the largest IPO ever.
Many investors, though, were not able to get their hands on the full allocation they wanted. Like John Boland of Maple Capital Management, who placed orders for around 5,000 shares for clients but was told the offer was oversubscribed and it is not likely that he would get the full order.
Revenue for Alibaba surged for the quarter from April to June by 46 percent, thanks to strong gains in the company's mobile business, leading to net income for shareholders almost tripling to $1.99 billion.
Early investors in the company are also reaping the rewards of their trust in Alibaba. Yahoo!, for one, will be selling about $8 billion worth of shares for the IPO but will still retain a 16.3 percent stake in the company. SoftBank was also an early investor but won't be selling at this time. This leaves the Japanese company with a 32 percent stake to become the largest single shareholder in Alibaba.
Shares sold translate to around 13 percent of Alibaba's capital. Out of the 320 million shares sold, almost two-thirds of those are from existing shareholders, including founder Jack Ma.
