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Alibaba.com nearly triples in value after stock exchange debut
2007-11-06
Shares in Alibaba.com nearly tripled in their first day of trading in Hong Kong on Tuesday, as the frantic boom in China-related stocks showed no sign of letting up. Shrugging off warnings of a stock market bubble, investors drove the business website's shares up from the initial offering price of 13.50 Hong Kong dollars (1.74 US) to 39.50 at the close -- a surge of 193 percent. The strong debut followed another sizzling opening from PetroChina, which became the first company in the world valued at one trillion dollars in its first day of trading in Shanghai. Alibaba.com, a business-to-business website started seven years ago, began trading just days after it raised 1.5 billion dollars in its IPO -- the second-largest Internet offering ever after Google in 2004. The IPO was over-subscribed 150-fold, underlining the massive demand for China-related shares, particularly new issues, despite some analyst fears that a correction is on the cards in future. "The better-than-expected performance of the stock shows investor bullishness in Chinese IPOs," said Castor Pang, strategist at Sun Hung Kai Financial. "Many anticipate that its parent, Alibaba Group, will be injecting assets into the company, and that's why many are still buying the stock despite the high price," Pang said. The company has built its success by providing small- and medium-size Chinese manufacturers of everything from garden furniture to sex toys a way to sell their products both within China and across the world. The website, which has both Chinese and English versions, offers free listings for suppliers and buyers. Revenue comes from a percentage of members who pay for additional services such as search listings or factory inspections. Revenue has grown from 359.4 million yuan (48.2 million US dollars) in 2004 to 1,363.9 million in 2006, riding on the back of the mainland economy's double-digit growth over the past few years. Former schoolteacher Jack Ma founded the firm seven years ago in the Chinese city of Hangzhou with less than 20 staff. It now has 4,400 employees. "I have said two weeks ago that our prices were very reasonable," he said Tuesday. "(The performance) proved that our judgement was right." The firm has said it will use the proceeds from the offering to both grow the existing businesses and for strategic acquisitions. The Wall Street Journal reported Tuesday that the company was planning to expand into Taiwan, Hong Kong, India and Japan, citing the company's chief executive officer David Wei. Hong Kong and Taiwan represent "the easiest, quick win," the newspaper quoted Wei as saying, while it has begun trials on a Japanese-language service. Ma said in Taiwan on Monday that he was also in talks with electronics manufacturing giant Hon Hai group, better known internationally as Foxconn. Alibaba.com is part of the Alibaba Group, which also includes Yahoo's China operation and Taobao.com, China's biggest online auction site. Yahoo holds a 39 percent stake in the parent company.
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