Listing of Alibaba Group on Hong Kong Stock Exchange

Listing of Alibaba Group on Hong Kong Stock Exchange

By 2007, with more than 162 million Web users, China became the world's second-largest Internet market after the United States. The stratospheric rise of Alibaba reflected a rapid economic shift in China – a growing rise of the middle class people taking a chance to chase “The Great American” dream. [Sherman & Westland, 2007]

Buoyed by robust global trade & strong consumption, China recorded a GDP growth of 11.4 percent in 2007, with its export volume grew 23 to 24 percent, as per the government statistics. 

Alibaba.com has opened entrepreneurial opportunities in China in a never before seen way. It has made it easier for the manufacturers to run their businesses. Companies from around the world could find potential partners from a database of 2.4 million low cost manufacturers which sell everything from ball bearings to karaoke machines.  They created a market for China which was open for the world.

In 2005, Yahoo! invested $1 Billion for a 39 percent stake in the Group & 1.2 percent in Alibaba.com .It had turned over Yahoo! China to the Alibaba Group to help in reviving the portal, as it was facing stiff competition from Google & Baidu [Munroe,2007].

Alibaba Debuts on Hong Kong Stock Exchange

Alibaba’s B2B site Alibaba.com, which thrived on trade and exports, recorded $285.3 million in revenue while profits increased 4.4 times to $127.7 million. It had been deliberating on launching its IPO for long and after getting such  numbers, they considered that no further delay should be done to launch an IPO.

On 5th November 2007, Alibaba debuted on Hong Kong Stock Exchange with an issue price of $1.74 (13.59 HKD). It arrived with a global offering of 858.9 million shares – 17 percent stake of the company. This IPO deal was managed by large investment names like Deutsche Bank Goldman Sachs & Morgan Stanley – again showing the interest it generated in global spheres. [pic 1]

Traditionally, stocks in China were considered to be worlds most expensive. Hence, Jack Ma’ decision to list its IPO in HKSE could be taken in a stride to involve investors from all categories. Money had always poured in companies listed in HKSE from investors in mainland China. He also set a reasonable price for the stocks to be attractive to all rungs of investors. Although, it was claimed that the price set valued the company at more than 106 times forecast of its 2007 earnings, it still beat the market expectations. The public portion of its IPO was 257 times oversubscribed. Many big investors received very few IPO than they wanted. The stock by the end of the day traded as high as HK$39.95, a gain of nearly 193 percent, as it received record demand from the retail investors. It got orders worth HK$447.5 billion (US$57.4 billion) from Hong Kong retail investors alone. In total, it could raise $1.49 billion & was considered to be the most popular IPO offering in the HKSE during that period.[Munroe,2007]