Alibaba 'electrifies' on debut

Traders work on the floor as they wait for a final price on the Alibaba IPO before the company's Friday listing. (Photograph by Reuters)

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Alibaba's record-breaking debut on the New York Stock Exchange is set to fire a "starter's pistol" for other tech stocks, especially those in the e-commerce sector, as it is a real business, with actual profit and genuine potential.

The Chinese e-commerce giant started trading late on Friday afternoon (SA time) and saw its stock hit an intraday high of $99.09 before ending at $93.89 - a 38.07% gain on its listing price of $68 billion. Some 271 million shares changed hands, in what Reuters reports is the world's biggest listing.

The wire service, quoting a source with direct knowledge of the deal, notes Alibaba raised as much as $25 billion on its debut, topping expectations of bringing in $21 billion, after underwriters exercised an option to sell an additional 48 million shares.

Alibaba now has a market capitalisation of $231.4 billion, making it the world's fourth-largest tech stock behind Apple ($604.5 billion), Google ($406.34 billion), and Microsoft, which is worth $391.56 billion. Facebook, which listed to much fanfare a few years ago, is currently worth $202.57 billion.

World Wide Worx MD Arthur Goldstuck says Alibaba's debut will "kick-start a new listing boom for technology stocks," especially in e-commerce. "It's an e-commerce starter's pistol." He notes the share price gains would have come partly from those who missed the Tencent train, and did not want to lose out again, as well as from those who want to tap into China's e-economy, which will be the world's biggest.

Alibaba's listing is set to be the next wave in "electrifying" tech stocks, says Goldstuck. He points to Netscape's 1995 debut as a move that kicked off interest in browser companies, although the group did not fare that well in the end. The next wave was sparked by Google, and then - a few years ago - by LinkedIn and Facebook, he adds.

Goldstuck says Alibaba will spark off the e-commerce wave; an event that did not happen when Amazon listed because it failed to ignite the market. Amazon - seen as a rival to Alibaba - is currently worth $153.08 billion.

Although Goldstuck expects the shares to come down after the initial euphoria, he notes they will resume their climb because Alibaba is a "real business". In the 2013 financial year, Alibaba turned over $6.5 billion, and reported an attractive profit of $2.9 billion.

The group, which has 20 000 staff, is so big it apparently could encompass several Western rivals, including PayPal, eBay, DropBox, Groupon, Amazon, Twitter and Spotify. The giant entity, founded in 1999, serves 190 countries globally, and has an end-to-end offering that encompasses online shopping "destinations", payment services and Web development.

Goldstuck says more initial public offerings are on the cards as people want exposure to e-commerce, especially in high growth markets. However, he notes, not all the listings will be as successful.

Vestact analyst Sasha Naryshkine notes "it's early days" in terms of the share price, although the stock surge is not hype as Alibaba is a "big business" that will grow to replace traditional shopping channels. However, he raises concerns about Alibaba's ability to handle quality control from its suppliers. "I think that's going to be impossible."

Top 10 IPOs of all time, before Alibaba:

Source: Renaissance Capital