The initial public offering from Jack Ma's e-commerce company, Alibaba, has brought a lot of wealth into its hometown of Hangzhou and will infuse local startups with the cash needed to break into their respective markets.
Projected to open trading at $68 per share, Alibaba's IPO opened at $92 per share. The Chinese e-commerce site built its success on business-to-business trading, before growing even faster when it allowed consumers to take part in the online shopping.
Alibaba's market capitalization, $230 billion, puts it ahead of JPMorgan Chase, Facebook, IBM, Oracle, Amazon and eBay. With the Chinese organization finally opening its doors to outside trading, investors have seized on the opportunity to ride China's economic wave and they've helped make a lot of people rich.
Alibaba, however, has already warned Hangzhou about the worries associated with rapid wealth. Back in July, Ma himself expressed hope that the city's newest millionaires wouldn't start to act like tuhao, which roughly translates into "uncouth bullies."
Savio Kwan, at one time Alibaba's chief operating officer and a current shareholder, says Alibaba has tried over the years to explain some of the dangers ahead for the employees who were about to turn into millionaires overnight. However, it was difficult to get through to employees, who were making approximately $250 per month.
"We talked about freedom of choice in 2002 and 2003," says Kwan. "People said, 'What is that?' I said, 'It's when you become rich and you don't need to work for a living anymore. You can choose to still come to work at Alibaba or choose to retire or to do something else.' "
Rupert Hoogewerf, publisher of Hurun, China's "Rich List," said he expects the wealthy born of Alibaba's IPO to move Hangzhou up the rankings of cities with the most millionaires. However, he suggested the newly rich will take measured approaches to their newfound wealth, due largely to the culture of the tech industry.
"The biggest challenge to somebody who got rich overnight is the change in lifestyle. Some turn to gambling, others live a lifestyle not commensurate to their wealth," Hoogewerf says. "But these tech people are slightly different. They put a lot of heart and soul into the business."
App-developer Yang Yang, who may have cashed out of Alibaba shares five years too early, says the company's culture will play a large role in keeping its now-wealthy employees from turning tuhao.
"I never heard of any Alibaba people wasting money on unnecessary things," says Yang. "It's because of the company culture, which says you must make good use of your money, work hard, be creative, get promoted. Many people used money from shares to start their own businesses."
