Alibaba More Than Doubles on Debut, Tops Forecasts
Shares in Alibaba.com more than doubled in their trading debut on Tuesday, topping expectations, after China's largest e-commerce firm raised $1.49 billion in Hong Kong's most popular initial public offering.
The robust debut reflects voracious demand for China-related stocks, as investors, many of whom received far fewer IPO shares than they had sought, shrugged-off the Hong Kong market's sharp drop on Monday and what several observers consider to be a sky-high valuation to buy up Alibaba.com shares.
Shares in Alibaba.com, in which U.S. Internet giant Yahoo is a key investor, traded as high as HK$32.00 early in the Tuesday session, compared with an IPO price of HK$13.50, which was at the top of an indicated range after the company's share sale drew record demand from Hong Kong retail investors.
The stock stabilized at about HK$30.00 early on Tuesday, up 122 percent on the IPO price.
"I'm not convinced," said Andrew Clarke, a trader at Societe Generale Securities in Hong Kong. "It's massively overpriced. I'd rather go buy Exxon at 15 times earnings. At least it's got a decent management and a proper business."
In grey market trade on Monday afternoon, Alibaba.com had ended nearly 88 percent higher, according to Phillip Securities.
Some market watchers had predicted a 50 percent debut gain after Monday's broad market sell-off. The Hang Seng Index's 5 percent drop -- its steepest one-day fall since September 2001 -- was sparked by Beijing raising uncertainties about how soon it would launch a plan to allow mainland investors to buy Hong Kong-listed stocks.
The Hang Seng Index weaving in and out of positive territory during the morning session in Asia.
Investors clamored for Alibaba.com shares even though its IPO price values the company at 106.3 times forecast 2007 earnings -- a steep premium to most of its peers.
Chinese search engine Baidu.com trades at 170 times 2007 forecast earnings, while Google trades at 46 times and eBay at 23.5 times. Trade media company Global Sources trades at 53 times, while Hong Kong-listed Tencent Holdings trades at 82 times prospective earnings.
Alibaba.com sold 858.9 million shares in its IPO, or 17 percent of its enlarged share capital, in a deal handled by Deutsche Bank, Goldman Sachs and Morgan Stanley.
The company generated orders worth HK$447.5 billion (US$57.4 billion) from Hong Kong retail investors alone, making it the most popular IPO ever in the city, surpassing share sales by Industrial and Commercial Bank of China and Belle International.
Yahoo holds a 1.2 percent stake in Alibaba.com, as well as a 39 percent stake in Alibaba.com's parent firm, which holds 75 percent of the listing company.
Alibaba.com, a business-to-business marketplace, was founded in 1999 by entrepreneur Jack Ma, and its initial public offering has been anticipated by investors for several years.
Other investors in the IPO included Cisco Systems and Taiwan's Hon Hai Precision Industry. The high level of oversubscription means many investors were disappointed with their share allocations.
With more than 162 million Web users, China is the world's second-largest Internet market after the United States.