Alibaba, BABA the Chinese e-commerce giant whose magical name and real-world business prospects inspired frenzied interest for months ahead of its record-setting initial public offering, can't make its Friday debut on the New York Stock Exchange just yet.
Order imbalances over the intensely hyped Alibaba IPO have so far delayed trading and could for another hour or more. But American depositary shares of Alibaba Group Holding Ltd., priced at $68, are expected to soar quickly once trades begin.
'There's a lot of hype over this stock. An $80 price is not unreasonable - demand could stampede the price,'' says Drew Dorweiler, a Montreal-based business valuation expert with Dartmouth Partners. 'The fundamentals are there for incredible volume and excitement.'
The IPO raised $21.8 billion, surpassing the $17.8 billion raised by credit card marketer Visa's 2008 IPO and Facebook's $16 billion IPO in 2012. But Alibaba's IPO falls just short of the global record $22 billion raised in Hong Kong and Shanghai by Agricultural Bank of China's 2010 stock offering.
With 320.1 million shares offered, Alibaba's market capitalization is valued at $168 billion before a single share trades hands. That's larger than that of AT&T, Bank of America and Merck.
Alibaba's business model - unlike other young Internet-focused companies with more prospects and buzz than actual earnings and revenue growth - created swelling demand for its shares.
A holding company that combines the sales, merchandising and financial services reach of Amazon, eBay and PayPal, Alibaba had revenue of $8.5 billion in its last fiscal year, up from $5.5 billion in 2013. Revenue for the second quarter ended June 30 jumped 46% to $2.53 billion and net income jumped 137% to $2 billion.
Governance experts, including Harvard University's Lucian Bebchuck, have warned of the 'serious risks' tied to Alibaba, mostly over the grip insiders have. But most investors have shrugged off governance concerns over Alibaba's lack of independent directors and 30 managing partners, who have the right to nominate a majority of directors.
A successful pre-IPO roadshow seemingly allayed concerns, and demand for shares prompted the company on Monday to raise the IPO's price range to $66 to $68 a share, up from an initial $60 to $66. Most shares were allocated to large institutional shareholders, not individual shareholders. Alibaba options will begin trading Sept. 29. MORE: Jack Ma's scrappy startup takes on the United States
Company insiders and early investors will be able to cash out today, unfettered by typical pre-IPO lockups.
Billionaire founder and executive chair Jack Ma, the diminutive former English teacher who started the company from his one bedroom apartment in 1999, plans to sell about 6% of his stake, or about 12.8 million shares. He'll remain Alibaba's biggest individual shareholders, with a 7.7% stake.
Speaking to CNBC ahead of trading, Ma said the IPO would not change the culture of the company. 'I don't want to disappoint shareholders. I want to make sure their making money,'' he said. 'I worry about making my customers happy.' MORE: From 'crazy' to China's richest man, Alibaba's Jack Ma
Yahoo! could be among Friday's biggest Alibaba winners. The company has previously said it plans to unload about 5% of its 22.4% Alibaba stake. But Yahoo! shares were off 10 cents to $41.92 in early trading. MORE: 6 answers to questions about what Alibaba is and does
Dorweiler warns that shares should be volatile going forward.
'It will be interesting to see if there's a bit of a correction in the stock price. A lot of people are steering clear for several days or weeks, just to see what happens,' Dorweiler says. 'The company is a winner with global growth potential. It could be a $100 stock sooner than later. But there could be volatility over the next few trading sessions.'
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