2015-09-18

Alibaba IPO One Year Out, A Look Back and Where We Are Now (video)

stock chart of NYSE: BABA (Alibaba Group shares)

Above: stock chart of NYSE: BABA (Alibaba Group shares) (source: google.com, Sept 18, 2015)
  • On 18 September 2014, Alibaba's IPO priced at US$68;
  • On 19 September 2014, Alibaba's shares (BABA) began trading on the NYSE at an opening price of $92.70 at 11:55am EST;
  • On 22 September 2014, Alibaba's underwriters announced their confirmation that they had exercised a greenshoe option to sell 15% more shares than originally planned, boosting the total amount of the IPO to $25 billion.
"... at closing time, on the date of its initial public offering (IPO), 19 September 2014, Alibaba's market value was measured as US$231 billion... the pricing of the IPO ... later increased to US$25 billion, making it the largest IPO in history. However, buyers weren't purchasing actual shares in the group, since China forbids foreign ownership, but rather just shares in a Cayman Islands shell corporation..." (source: Wikipedia, emphasis added)

What happened?

According to Bloomberg Business (August 31, 2015): 
  • “... people expected healthier growth in China’s macro economy and had higher hopes for it given a lot of people considered Alibaba as a barometer as the health of the economy ... they are just worried things are slowing faster than anticipated.” - RJ Hottovy, analyst, Morningstar Inc., Chicago;
  • Alibaba is facing competition from smaller online retailers in its home market;
  • While the company’s $1.3 trillion yuan ($204 billion) in total transaction value in its online marketplaces was more than six times that of JD.com Inc., China’s second-biggest e-commerce company, in the first half of this year, its 37 percent growth rate was less than half of JD.com’s;
  • Slowing growth stems from e-commerce market saturation in China’s larger, wealthier cities and the company’s strategy of shifting to services over smartphones and tablets, which generate less revenue from ads compared with desktop computers. Analysts estimated in September that Alibaba’s revenue would increase 33 percent for its fiscal 2016 ending in March, the projection is now cut to 29 percent, according to data compiled by Bloomberg.
  • Hedge funds have been part of the investor exodus from Alibaba as they cut their stock holdings in the company to about 3.1 percent as of the end of June from 5.2 percent in the third quarter of last year, according to data in public filings compiled by Bloomberg. They boosted their ownership in JD.com to 18 percent from 1.2 percent during the period.
Lock-up expiration: As reported by Bloomberg on Sept. 3, 2015, Alibaba Group Holding Ltd. Chairman Jack Ma and Vice Chairman Joseph C.Tsai plan borrow more than $2 billion through a margin loan pledged against their Alibaba stock--the lockup period on Alibaba stock owned by Ma (7.6%)  and Tsai (3.1%) expires on Sept. 21. 2015--Tsai said publicly on the last earnings call that he and Ma will not be selling shares at the lockup expiration. Reportedly the money raised may be used to fund Blue Pool Capital Ltd., the family office of Alibaba founders set up by Tsai and Alexander West in 2004. Former Citadel Managing Director Oliver Weisberg was hired this year to co-run the firm, which has also brought in Sydney Zhang, a former allocator from the Chinese foreign exchange regulator, to lead hedge-fund investments. Credit Suisse Group AG, Goldman Sachs Group Inc. and Morgan Stanley are among banks reportedly working on the transaction. Bank fees on these kinds of deals are reportedly "lucrative." Ma is China’s second-richest person with a net worth of $29.5 billion, while Tsai has a $4.4 billion fortune, according to the Bloomberg Billionaires Index.

A look back to September, 2014:

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Sept 17, 2014: NSBO Head of China Research Miranda Carr discusses the coming Alibaba IPO and what to keep in mind when using their ecommerce business. She speaks with Ryan Chilcote on Bloomberg Television's “The Pulse.” (Source: Buyer Beware When Using Alibaba: Carr: Video - Bloomberg)

Alibaba:
NSBO - North Square Blue Oak: domain name: nsbo.com

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