Breaking into public trading with a market capitalization valued somewhere between Wal-Mart and JP Morgan, investor reception of Chinese e-commerce heavyweight Alibaba's initial public offering is outpacing analysts' expectations.
It's Alibaba's $230 billion market cap that has kept investors salivating at the opportunity to purchase shares of the company. To put the rapidly growing company's IPO into perspective, eBay's market cap is currently $66 billion and Amazon's is $152 billion.
Enhancing the attractiveness of Alibaba, the IPO offers what appears to be both a sustainable and profitable route for investors to participate in China's economic prosperity, according to Mark Otto, partner with J. Streicher & Co, and a New York Stock Exchange floor trader.
"This is the most-anticipated event I've ever seen in my 20-year career on the floor of the NYSE," says Otto. "I think today's move is sustainable: The company is profitable, unlike some of its competitors, and it is a way for traders to tap into the Chinese growth story."
With shares expected to open at $68 per, the opening price, $92.70, was actually 36 percent higher than the market projected the evening before. Alibaba's market value of $168 billion during its IPO places it ahead of Facebook and Google's intial offerings, which were assessed at $104 billion and $23 billion, respectively.
After hearing bids from both Nasdaq and the NYSE, reports claim Alibaba chose the later due to the former exchange's fumbling of Facebook's IPO. Nasdaq is said to have delivered a presentation to Alibaba to prove its indexing issue had been resolved, but the Chinese e-commerce company chose to go with what it felt was a more sure route.
Founded by Jack Ma, who twice failed China's National College entrance exams, Alibaba has emerged as a force in China's e-commerce market.
Many liken Alibaba to a Chinese version of eBay, as some of the company's primary offerings include online shopping and virtual payments solutions, leavened with a dash of Google. The company's business-to-business model of e-commerce expanded to allow organizations to sell to consumers.
Ma stepped down as CEO of Alibaba in January 2013 and Johnathan Luck stepped in, but Ma has remained the face of the company and has kept a hand in operations.
The timing of Alibaba's IPO is perfect, as there is tremendous thirst for what the Chinese e-commerce company offers, according to Brendan Ahern of KraneShares, a mutual fund firm that invests in Chinese companies
"You've got a world that is starved for growth, and this segment of the Chinese capital markets offers a high degree of growth," said Ahern.
