China's e-commerce giant Alibaba began trading its shares Friday on the New York Stock Exchange. Here are ten things to know about Alibaba, and why its initial public offering made history:
Alibaba raised $21.8 billion in its debut, making it the biggest US-listed IPO in history after the IPO of credit card processing company Visa in 2008. If Alibaba's investment banks were to exercise their option to sell an additional 48 million shares, it could make Alibaba's IPO the biggest in the world, beating out the $22 billion IPO of Agricultural Bank of China in 2010.
Don't forget Yahoo!
It may have been a big day for Alibaba and its founder Jack Ma, but Yahoo's investors are feeling pretty good after Alibaba's IPO. Yahoo was an early investor in Alibaba, paying $1 billion for a stake in the company in 2005. Yahoo likely made $8.3 billion to $9.5 billion in Alibaba's IPO, and will still own a 16% stake in the company worth $37.7 billion.
Alibaba eclipises Silicon Valley
Alibaba now has a market capitalization of roughly $219.8 billion, according to FactSet. That makes the company bigger than some of the US technology industry's most successful names, such as Facebook, eBay, and even Amazon.com.
All in one
Investors are interested in Alibaba because the company dominates many businesses in China that, here in the US, are run by individual companies. Alibaba owns the websites Tmall and Taobao, which are similar to Amazon.com and eBay, respectively. The company also earns money from transaction fees related to its various businesses through Alipay, which is like PayPal. That's just three of Alibaba's many subsidiaries.
Unlike the US e-commerce giant Amazon, Alibaba has been consistently profitable. The company had $8.5 billion in sales in its latest fiscal year ending in March, with net income of $3.8 billion. The year prior, Alibaba had $5.4 billion in sales and $1.4 billion in profits. In comparison, Amazon sold $74.4 billion in goods in 2013, but made only $274 million in profits that year. In 2012, Amazon reported a net loss of $39 million.
If Alibaba does well for investors, it will be the exception to what has been the trend for Chinese companies. When Chinese companies have listed stocks on American markets, their shares have lost an average 1% a year for the next three years, compared with an average 7% annual gain for other US IPOs, according to research by Jay Ritter, a finance professor at the University of Florida.
Second time around
This isn't Alibaba's first time going public. Alibaba took its online shopping portal Alibaba.com public in 2007 in Hong Kong. Alibaba.com was a publicly traded company only for a few years. Alibaba took Alibaba.com private in 2012.
Jack Ma, who started Alibaba in 1999 in his apartment in the Chinese city of Hangzhou, is now among the richest people in the world. Ma's ownership in the company is worth roughly $18.2 billion, based on Alibaba's closing share price Friday. That doesn't include the shares he sold in the IPO, which are worth another $867 million, and his other investments. Bloomberg put his entire net worth at $21.9 billion, making him the 34th richest person in the world.
Big win for NYSE
Alibaba chose to list its shares on the New York Stock Exchange, making it the second A-list technology company to go public on the Big Board in less than a year. The NYSE handled Twitter's IPO last year. NYSE's competitor, the Nasdaq Stock Market, has struggled to win the business of big tech companies since Facebook's IPO in 2012, which was plagued with technical problems.
Life is like a box of...
Jack Ma biggest hero is the fictional character Forrest Gump. "I really like that guy," Ma said, in an interview with business channel CNBC on Friday. "Every time I'm frustrated, I watch the movie. (The movie tells) me that no matter whatever changed, you are you."