Alibaba surges past Facebook in storming stockmarket debut

Chinese e-commerce giant Alibaba surpassed Facebook by market capitalisation on its first day as a public company right from the minute it started trading and closed with a valuation of more than US$231 billion.

Alibaba surged 38 per cent above its initial offering price to close at US$93.89 in New York on Friday. The Chinese e-commerce company, which began the day with a value of US$228.5 billion, now trails only Google, Apple and Microsoft in size among US-traded technology companies. Facebook passed US$200 billion in market value earlier this month and is worth US$201.6 billion as of Friday’s close.

Alibaba’s public market debut contrasts with Facebook’s May 2012 sale. Facebook, which was valued at US$104 billion at its IPO, lost half that in the following months, and the stock took more than a year to close above its IPO price. While Alibaba has risks related to corporate governance and the Chinese government’s unpredictability, that hasn’t stopped investors, said Jeff Sica, chief investment officer at Sica Wealth Management.

“There is much more of an ignorance-is-bliss attitude, there’s much more of a feeding frenzy where investors are afraid to miss out on the next big thing,” said Sica, whose fund manages more than US$1 billion. “There’s been hunger built up in the market for Alibaba and they’re ignoring the fact that there are a lot of negative variables.”

Facebook, the world’s largest social networking site, marked its debut on the Nasdaq exchange, where it was plagued with technical issues on top of investor scepticism about the company’s strategy for making money via advertising on mobile devices.

Facebook’s ascent to US$200 billion came as it built its business model for advertising on handheld devices. Now the company gets more than half of its ad revenue from mobile phones, compared to almost nothing at the time of its IPO.

Alibaba’s US$21.8 billion sale was the biggest-ever IPO for a technology company, buoyed by growth in China’s e-commerce market. With an IPO price of US$68 a share, Alibaba was valued at 29 times expected earnings for the year to March – below multiples fetched by Chinese and US rivals including Tencent Holdings, Baidu, and Analysts forecast that Alibaba’s earnings will grow 50 per cent in fiscal 2015 from the previous 12 months.

Another big winner on Friday was Yahoo, which is making amends for years of blundering with one smart move: an early investment in Alibaba.

Yahoo is in line to make US$8.3 billion to US$9.5 billion from the initial public offering, depending on whether investment bankers exercise their right within the next month to buy additional stock in the deal.

The pay-off supplements the US$7.6 billion jackpot that Yahoo collected two years ago after selling another chunk of its Alibaba holdings and reworking a licensing agreement with the company.

Additional reporting by Associated Press