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Alibaba Takes Off! (UPDATE)

Brace yourself. Jack Ma’s Alibaba starts trading on Friday, and along with the float, a market place of 1.3 billion people and millions of techies wanting to grow up to be just like Ma.

2014 has been quite the busy year for tech IPO’s coming out of China, but Alibaba is the jewel of them all, not only in Asia, but also in the United States, where it could end up being the biggest IPO ever launched on U.S. soil. Which also means the largest in the world.

Analysts are predicting demand for Alibaba’s shares will be so robust that it could easily surpass Facebook’s US$16 billion IPO, and end up entering like a beast, outraising them all at an estimated US$25 billion IPO.

This would put Alibaba in an exclusive club with the likes of Visa, General Motors, and a few Chinese banks.

Not bad for a former high school teacher who claims to not be very savvy when it comes to technology, and who started the company in a small apartment in Hangzhou, China, in 1999.

Alibaba shares will be priced on September 18, and will begin trading on the New York Stock Exchange the next day, under the ticker symbol BABA.

The Alibaba executive team, including Ma, have been on a roadshow as of late, speaking to institutional and professional investors trying to generate buzz for the stock. These investors are afforded special privileges allowing them to buy shares at the set IPO price—usually the night before trading. The rest of us (peons?) won’t be allowed to buy until the shares begin trading on the NYSE the following open-market session.

If the buzz on Twitter is any indication, then Alibaba’s IPO success is one for the history books and could set off a rally for other Chinese tech companies like Weibo, Baidu, and even JD.com. Many analysts are already very bullish on these stocks even though their share prices have been uninspired as of late.

Analysts believe this could be due to investors pulling money off the table to roll it into Alibaba, and if so, then you can expect money to come rushing back in once the Alibaba buzz wears off.

Our prediction is that all the Alibaba buzz might create a great ride for the next few weeks, maybe even months, but the smart money will wait for the price to float back down to earthly levels before buying in for the long haul—and we do think Alibaba is in for the long run as long as Ma is on board.

UPDATE     (Sep 18, 2014 6:25 PM)
Alibaba opens at US$92.70 from an issue price Thursday night of US$68.00, launching the biggest IPO in U.S. history.

UPDATE     (Sep 24, 2014 9:10 AM)
A little late but worth noting, an interesting observation I had during the launch that aired on CNBC. Actually, there were quite a few interesting points, but if I had to choose one it would have had to been the lightening fast price action—the limit orders and stops being hit at record amounts of speed. The high-frequency trading (HFT) systems were obviously in control, attacking every movement with incredibly fast precision. But as I sat there and watched BABA’s price melt upwards like a painter frantically splashing paint on his canvas with his brush, I wondered whether this HFT market we currently live under is really all that efficient for your average participant. All I could see was a lot chaos, but all of it being controlled, or manipulated, by something larger, more powerful, and much more chaotic… almost like a Great White at an ocean feast. Many types of predators, but only one Great White lurking and controlling the feeding frenzy with little to no effort. I’m not sure if I believe it’s fair to call capital markets efficient any longer. I think a fairer way to view them is as “exclusive.”

  • Trade Dynamics

    I think the froth is already tapering. I’m guessing the insiders got the fair price, and I would like to see it drop to around the 70 range before picking up. That may come sooner than most think.