Alibaba makes record $25 billion IPO

Alibaba finally posted the world’s biggest initial public offering (IPO) this week after a lengthy build-up.

It’s been a long road to get there, but after months and months of build-up, Chinese e-commerce giant Alibaba finally floated on the stock market last Friday, 19 September.

Everyone who had been watching the deal had expected it to be huge, and there was talk of a record-breaker long before Alibaba had even confirmed it would list on the New York Stock Exchange. They weren’t disappointed.

Overwhelming demand prompted bankers running the deal to use their option to sell additional shares, which took the overall size of the IPO to around $25 billion (£15.3 billion) – making it the biggest IPO in history.

Founder Jack Ma agreed to sell as many as 2.7 million extra shares, while co-founder Joe Tsai had also said he was willing to sell an extra 902,782, Reuters reports, Alibaba itself had agreed to sell an extra 26.1 million shares, while Yahoo sold another 18.3 million on top of its originally planned sale.

Not only did the shares sell well, but the price shot up in the firm’s first trading session with a spectacular 38 per cent rise. That represents a massive bet not just on the booming e-commerce industry in China and its growing middle class, but a sign of faith in the firm’s plans to expand into other global markets.

Given that Friday’s closing price leaves Alibaba with a market value of $231 billion, surpassing Amazon and eBay combined, it will be interesting to see how the company fares outside of China where these other firms have already secured strong footholds in the market.

But with Alibaba accounting for 80 per cent of China’s e-commerce market already, it seems that the firm’s success is not necessarily predicated on international revenues.

Alibaba’s IPO means that the three biggest IPOs in history in terms of cash raised are all Chinese companies. Former record holder Agricultural Bank of China raised $22 billion in 2010 in Hong Kong, but now sits in second place. Chinese lender ICBC takes third place.