Assessing the impact the Alibaba IPO
- By Eugene Clark
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E-mail China.org.cn, September 22, 2014
Alibaba's IPO in the United States has been a tremendous success. These are some of the reasons why it is significant.
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Alibaba CEO Jack Ma [File photo] |
Making history. Alibaba's stock opened on the New York Stock Exchange at US$92.10 per share, making the company worth around US$24 billion dollars, the largest IPO in U.S. history -- bigger than Facebook (US$16 billion), General Motors (US$15.7 billion) and Visa (US$17.86 billion). Putting the figure into perspective, this gives Alibaba a market value that makes it one of the world's great companies and an amazing China success story.
Foreign owned and Chinese made. In an interesting twist, Alibaba is now a Chinese based company with most of its income made in China while its shareholders are mostly Westerners, principally Americans. It will be interesting to see the influence of this foreign ownership on the company's future direction, performance and governance.
Strengthening China-U.S. economic relationships. The Alibaba deal also significantly strengthens economic relationships between the world's two biggest economies -- China and the United States. This relationship will hopefully further motivate the United States and China to partner together to create future win-win situations for their mutual benefit and the benefit of the wider global community.
Alibaba is truly a global company. When Hong Kong would not change its rules to accommodate Alibaba's needs, the company went to the NY Stock Exchange. In a global economy, companies will shift capital and allegiance to do what is in their best interests. The lesson for Hong Kong and other stock exchanges is the need to be proactive in anticipating company needs and business trends ahead of time to remain attractive and responsive to emerging global players like Alibaba.
Enhancement of the "China brand." There is no doubt that many people outside China know little about Chinese tech companies and global awareness of the leading players is low. What's more, there was a general skepticism about the quality of Chinese listings given the publicity received by a number of Chinese companies after they were delisted from U.S. exchanges. The enthusiastic and positive endorsement by American Alibaba investors shows a confidence that Alibaba is able to fulfill, and the company will continue to meet the high governance standards required of their new investors. This investor confidence has already done much to lift the spirits and restore the pride of other Chinese companies and entrepreneurs. To those both inside and outside China, the spectacular success of the Alibaba IPO has enhanced the "China brand."
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