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Why a Chinese Company Is the Biggest IPO Ever In the US
An anonymous reader writes The Chinese e-commerce giant Alibaba has made headlines lately in US financial news. At the closing of its Initial Public Offering (IPO) on Friday, it had raised $21.8 billion on the New York Stock Exchange, larger even than Visa's ($17.9 billion), Facebook's ($16 billion), and General Motors ($15.8 billion) IPOs. Some critics do say that Alibaba's share price will plummet from its current value of $93.60 in the same way that Facebook's and Twitter's plummeted dramatically after initial offerings. Before we speculate, however, we should take note of what Alibaba is exactly. Beyond the likes of Amazon and eBay, Alibaba apparently links average consumers directly to manufacturers, which is handy for an economy ripe for change. Approximately half of Alibaba's shares "were sold to 25 investment firms", and "most of the shares went to US investors."
http://abcnews.go.com/Business/alibaba-chinese-company/story?id=25591454
"Alibaba -- open sesame. Alibaba -- 40 thieves," Ma said. "Alibaba is not a thief. Alibaba is a kind, smart business person, and he helped the village. So...easy to spell, and global know. Alibaba opens sesame for small- to medium-sized companies. We also registered the name AliMama, in case someone wants to marry us!"
[Fuck Beta]
o0t!
I keep reading it as Alabama.
Troll is not a replacement for I disagree.
Alibaba is a kind, smart business person
Somehow I keep reading thief.
Because it could enlist in the US without changing it's management structure. The US financial regulations don't hinder the execution of family values.
I know that this is a hard choice (especially since I heard Alibaba has soared by 38% in its first day) but please consider the following:
About 5 years ago I stopped investing in Chinese companies. Why? Because I didn't want to support even indirectly a regime that, without apology, oppressed Tibet and supported the despotic regime of North Korea. I hold them largely responsible for sacrificing millions of my long-separated brothers (yes, I'm ethnic Korean) through starvation and torture simply to keep a "buffer state" in between them and the "capitalist" (ha ha, what irony) South Korea and U.S.
My stance was only hardened by their support, for purely geopolitical/economic considerations (OIL), of Syria and Iran (and, I think Libya). They and Russia have kept those regimes propped up and have made the tragedies in the Middle East even worse (of course America started it but at least we know now that most of us were idiots to be led by one). That's not to mention the authoritarian and despotic regimes that the Chinese GOVERNMENT is supporting in Africa purely for their resources.
Look, I know the West (and especially the U.S.) have done a LOT of bad things but the Chinese government doesn't even make a pretense of things like human rights, even in their own country. As I've said, they've been willing to sacrifice millions for a modicum of security (they could've asked the U.S. and S. Korea if, in return for not letting the Kims return to North Korea from one of their trips to China, we would promise not to put American troops north of the 38th parallel. As if S. Korea would even want American troops on the peninsula once the threat was gone). Now, living in S.E. Asia, I see firsthand how the Chinese government with its growing power is throwing away treaties and agreements it has signed in order to bully the Vietnamese and Philippines with their ridiculous "cow tongue" shaped demarcation of the seas. They are returning to 19th century "gunboat" diplomacy in the 21 century world.
I fear that as China grows ever stronger, they will continue to discard previous commitments to peace and will literally force their will upon the world. Is that what you want to support? I'm a realist, and I love my gadgets and my improved standard of living brought on by the flood of low-cost Chinese products (often produced with stolen patents and technologies but that's another story) and I'm not quite ready to live without. However, when there's a choice, when you can purchase something that is identical (hopefully) in every way including price to another but one is made in China and one was made in Sweden(?), I hope you'll make the same choice I do.
If the Chinese government, not the U.S. government had the power the NSA has; would any of us have any protection at all? Think of what kind of world that would be to live in. (That's what 1.2 billion people ARE living in).
(If you're wondering why I'm advocating not buying/investing in China and hurting Chinese citizens as opposed to just their government, remember that the world boycotted South Africa during their Apartheid regime even though it undoubtedly hurt many whites and blacks who were good people. And it worked.)
The reason Alibaba will take over from Amazon and Ebay is simple. Two things.
First, scale. It moves more product than Amazon and Ebay COMBINED, and that's before even entering the US market. The network effect will dominate.
Second the vast majority of what Amazon and (especially!) Ebay sells is made in factories in China anyway. Alibaba will allow cheaper prices for the same products without having to go through the middlemen and let Ama/Eba skim off profits in the middle.
If i can buy a part directly from the manufacturer in China for $3.99, I'm not going to pay $11.99 for Amazon to deliver it to me or even $5.99 for an Ebay reseller.
Alibaba will have a price advantage on the other big players, and that's what'll matter in the end.
I sure wouldn't be wanting to hang onto Amazon or Ebay stock right now (assuming either have stock, sorry I don't keep track of things like that).
Ali Baba is the wood cutter who uncovers the thieves.
> Some critics do say that Alibaba's share price will plummet from its current value of $93.60 in the same way that Facebook's and Twitter's plummeted
The vast majority of IPOs are lower in price 6 months after the issue date. Usually what happens is that company owners have some restrictions on when they can start selling stock - and those are typically 6 months or so. So on the day of initial sale supply is very constrained. Later a lot more shares flood onto the market.
For example Facebook went from $38 to $19.
Purchasing IPOs on day of issuance is a sucker move.
It's a Chinese company located in China, and most of its business and customers are in China. So why is it doing its IPO on the US stock market?
Shouldn't NYSE/Nazdaq disallow this? SEC and FTC have no jurisdiction in China or anywhere else outside the USA. If a chinese company listed on NYSE did fraudulent accounting or whatever, SEC can't do jack shit about it.
The whole thing seems like a clever scheme by Chinese companies and Goldman Sachs to sucker money out of U.S. investors.
Shares go to Alibaba Holdings Group Limited in the Cayman Islands. The contracts enabling proxy investment by Americans (otherwise illegal in China) have never been upheld in a Chinese court of law. Not something I would want as a long term investment.
The less you understand the company, the more attractive it is. I suspect the opacity of its operations are a draw.
I remember the tech bubble: "Two guys with a server and a dream" could make millions (on paper). If they cashed out quickly enough, they could turn it into currency.
China has arguably moved from communism to fascism and as Mussolini stated "Fascism should more properly be called corporatism because it is the merger of state and corporate power." One can see many of the tenants of an oligarch's paradise: a single party police/surveillance state, labor unions are outlawed, environmental regulations are practically non-existent, imminent domain is abused, and there is an income inequality that even surpasses the US. Capitalism has chosen the most profitable government model and is hedging their investments on it. China is already the largest trading nation and is expected to soon surpass the US as the largest economic power. In the 1930's many American investors flocked to the economic growth in fascist germany. and Prescott Bush(perhaps indirectly) come to mind. Given the current political climate in the US perhaps there may be another Business Plot in our generation.
I imagine many of these large investment firms have direct or indirect access to zero percent federal reserve loans (going on six years with no end in sight) and they would be foolish not to speculate on Alibaba with house money.
If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be-T J
The IPO also wasted nearly $10B considering that the issue price was $68 and it started trading at $95. I just can't understand the logic behind the IPO mechanism. The purpose of an IPO is to raise as much capital as possible for a company to enable it to grow. However, 41% of the IPO value didn't go to the company; it went to lottery-winning middle men who were given shares for $68 and immediately flipped them to the open market.
An IPO should operate like a Dutch auction, with company having a trading account loaded with all of the IPO shares and starting sale for at a high valuation like $200 and then ticking down 1% every minute that "too few" shares are sold. This maximizes the haul for the IPO company by not squandering billions of dollars on bank insiders.
I was going to say that China screws foreigners. Companies that want to do business in China have to bribe the local officials, and trade away intellectual property. The government will make up regulations that favor local manufacturers. In addition, China has lots of spies steal foreign technology.
.
It is the same reason that Hollywood always touts dollar amount of ticket sales and not the number of tickets sold. With the ever increasing ticket prices, ticket sales will always increase, even if the number of ticket sales remains the same. If you take into account inflation, Gone With The Wind (1939) is the largest grossing movie.
IPOs are subject to a similar inflationary hype. This is the same Wall Street that crashed the world economy a few years back. They want to make it appear as if everyone is farting sunshine and rainbows so Main Street will start sending money to Wall Street once again.
Be afraid, be very afraid.
It really seems like pretty much any tech IPO is going to be huge, even though history shows that most of the recent ones (last 20 years) are bad investments. Is Wall Street really just packing so much extra cash that they have nothing better to invest in than a Chinese company with no actual presence in the US? This whole thing just seems crazy to me.
I love that Yahoo is pocketing 8 Billion today from sound business deals and you still refer to them as shit, get bent!
I think you mean rife.
Yes alibaba is a theives market. Alibaba does little to root this out too. Moreover the entire china small items trade competiveness relys on the rediculous postage rates (low) that allows delivery in the US for a mere $1 worth of postage. Finally all the small vendors lie about the item in the postage to evade customs charges.
Amazon could make great noises and will.
On the other hand who owns Alibaba's 120 billion? Americans now. If the congress sicks their dogs on ALibaba it's the same as pilfering 120 billion from investors.
Meanwhile amazon has a PE nearing 1000 (who are they kidding?). AMazon's 1000 PE is justifed only on the basis of their growth rate not their earnings. If their growth is threatened (enter alibaba) their stock price crashes. if it crashes to a P/E ratio of 30 or 100 then 90% of the stockholder calue is whiped out. Gone. Not transfered. Gone.
So what's your poor bribed congressman to do. Act on alibaba's theivery to save Amazon, or not?
tough choice.
Alibaba's stock price over the next year will be a race between their growth in value, and the trees Amazon and E-bay fell in their path. I predict it goes up for 1/4 then down in response to regulatory pressure after the elections. THen eventually back up if their revenues grow,.
Some drink at the fountain of knowledge. Others just gargle.
People will flock to buy stuff and invest in this company which markets and sells goods manufactured almost exclusively in China and then have the nerve to complain about the US foreign trade deficit. We the stupid, blind and thoughtless Americans, brought it upon ourselves, and continue to do so, all the while blaming it on Obama, Congress or whatever other fool is in office. We get what we deserve I guess...
errr....umm...*whooosh* *whoosh* Is this thing on ?
I seldom post but read regularly - great and varied source of mat'l on many different subjects. This series of posts seemed to score lower than most, at least subjectively from my POV and particularly where critical posts were being made and often by foreign nationals. Perhaps I'm just being too touchy-freely or perhaps those who make these assessments have a POV quite different from mine. I certainly will cop to the former at times, but this thread felting jarring in that respect - and for the for the record, this isn't about the great /. snark, which is awfully damned good! :-)
QRWW
On the other hand who owns Alibaba's 120 billion? Americans now.
US investors don't own Alibaba, the Chinese retail giant. Chinese law doesn't allow foreigners to own a Chinese strategic asset. What US investors are buying is interest in a Cayman Island “variable-interest entity”. Stockholders won't have the usual influence on corporate governance or management.
http://www.marketwatch.com/sto...
will be the biggest IPO ever in the US and prove the SEC and the rest of the goverment is a sham.
Yes alibaba is a theives market. Alibaba does little to root this out too. Moreover the entire china small items trade competiveness relys on the rediculous postage rates (low) that allows delivery in the US for a mere $1 worth of postage. Finally all the small vendors lie about the item in the postage to evade customs charges.
The same happens when I buy on eBay or Amazon Marketplace.
Lot's of Chinese vendors there that ship from China.
Also, US vendors lie on the customs sticker as well, if they care to put that information on a package at all.
I live in Germany and I order from all around the world, Every time I need to go to the customs offices to pick up a package because it was not declared properly it's a package from the US or Australia.
Yes alibaba is a theives market.
Well D'uh! Ali Baba is a famous fictional leader of thieves.
As Chinese economy grows, so does its middle class. As its middle class grows, it demands more democratic reforms and more government responsibility - ultimately, a way to better China, for both its people and its neighbors.
That was the Nixon/Kissinger theory of the 1960s/70s. It was used to cut China all sort of political and economic slack. It was proven wrong by the 1989 Tiananmen Square Massacre.
So if you want a better China, you should do the exact opposite of what you're doing.
No. If you want a better China then the US should treat China as China treats the US. Have reciprocal economic and trade policies, punitive measures for egregious behavior, ... No more cutting them slack hoping they will moderate over time, no more treating them like they are an impoverished developing nation, ... To create an environment where only respect for human rights and the rule of law is necessary. Free trade requires that trade also be fair.
And before someone starts with all the US debt they own. They need those US bonds to manipulate their currency to create a huge built-in discount for Chinese goods and services. To stop buying US bonds, or to sell their currently held bonds, would cause their currency to rise. Their artificially low currency is the real key to their global success, not low wages. They are as dependent on their US bonds as we are.
Alibaba actually has revenue, as opposed to Facebook and Twitter's future-revenue based on the number of people visit their website.
Comment removed based on user account deletion
That was the Nixon/Kissinger theory of the 1960s/70s. It was used to cut China all sort of political and economic slack. It was proven wrong by the 1989 Tiananmen Square Massacre.
Was it, though? China circa 1960s/70s was a totalitarian dictatorship where Tiananmen square was an impossibility simply because any dissent would be crushed long before it would get to mass protest stage, and the yearly number of victims was far greater, too. Compared to China after Tiananmen, the latter is far more liberal. It's even more liberal today.
If you want a better China then the US should treat China as China treats the US. Have reciprocal economic and trade policies, punitive measures for egregious behavior, ... No more cutting them slack hoping they will moderate over time, no more treating them like they are an impoverished developing nation,
I did not suggest doing such a thing. The best thing you can do is just trade (and yes, this doesn't preclude e.g. tariffs to even out the price of labor differences, environmental concerns etc).
Business first, politics second.
Anyone can buy share in an IPO, that's pretty much the definition of what it is.
China rather want Amazon and eBay than Alibaba.Because Amazon and eBay sells more goods than Alibaba.
Also, US vendors lie on the customs sticker as well
I am glad they do. Many US shippers (as well as shippers from other countries) are happy enough to fiddle the declared value or shipping charges a little. Which helps: import duty is paid over the full amount (value + postage), and declaring either a little lower may bring you under the threshold above which tax is due.
By the way, I am ok with paying import duties. I am not ok with the processing of said duties taking upwards of 2 weeks suring which the shipment is held, and the post charging me an additional €10 in administrative fees to handle the tax.
If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...
I've used aliexpress.com (the consumer site for alibaba). It's incredibly scammy.
The prices are not that different to those offered by ebay sellers (usually the same). Ebay accepts Paypal, Aliexpress doesn't. Although they have an ill reputed escrow service.
Aliexpress selers have a lot of things you can't buy on ebay. It's great for buying knockoffs. I used it to be Gameboy and NES clone.
It's very popular with women, who use it to buy cosmetics at very low prices (probably fake brands).
If he actually cares about decent hard working Americans he saves Amazon because Amazon investors at least own the company and Amazon is a US company providing a useful potentially profitable service.
Alibaba investors on the other hand are Wall Street gamblers who don't actually own anything other than some moon beam and unicorn promises that Alibaba really will distribute its profits to the Cayman islands company they actually own. That also presupposes the Chinese government won't just decide the whole arrangement isn't legal in the first place.
Repeal the 17th Amendment TODAY! Also Please Read http://www.gnu.org/philosophy/right-to-read.html
America is where you go to sell stocks, easiest place to to part people from their money.
"If any question why we died, Tell them because our fathers lied."
Yes and no. The communist party is just flip-flopping between a bit of liberalization and then oppression. When the party needs money, they liberalize a bit. When they have enough, they oppress so as to prevent the growing middle class from threatening their authority. We can attest here in Hong Kong with the escalating prosections of activists by our government recently. The communist party is now in a house full of money and they can finally kill the noisy goose that used to be the only one that lay gold eggs.
"Sweet Home, Alibaba. Where the rivers run red."
China could easily become an aggressor much the same way Russia is with the Ukraine.
Or the way the US is/was with Afghanistan, Libya, Iraq, Vietnam, Panama, Cuba (Bay of Pigs), etc. Furthermore have you forgotten how the US was founded? (Hint, it wasn't populated with white people 200 years ago.) Have you forgotten the number of dictators that the US has installed and supported including but not limited to Saddam Hussein, Francisco Franco, Hosni Mubarak, Augusto Pinochet and many many more.
Let's not pretend the US has been some paragon of virtue over the years, shall we?
If China were to get in a war with Japan over Japan's northern islands, the share value of these companies could evaporate overnight.
If that happens, the value of a few companies should frankly be the least of your concerns. I'd be a lot more concerned about WWIII starting.
As much as investing in BRICs is tempting, it can not be forgotten that most of these places are not democracies.
Precisely half of the BRIC countries are democracies, specifically Brazil and India. Russia ostensibly is a democracy though in reality not so much these days. China is the only one that is not a democracy. Some people include Indonesia (BRIIC) which is among the most populous countries in the world (currently #4) and it too is a democracy.
First, scale. It moves more product than Amazon and Ebay COMBINED, and that's before even entering the US market. The network effect will dominate.
That doesn't mean a damn thing once a company leaves their home country. Alibaba dominating in China doesn't mean they are assured of any kind of success on the other side of the Pacific. There are innumerable examples of companies that dominate their home markets that struggle in new markets including Walmart, Google, eBay and others. Alibaba might be a great investment and dominate the Chinese market but it isn't remotely certain they will be anywhere near as successful outside of China.
Second the vast majority of what Amazon and (especially!) Ebay sells is made in factories in China anyway.
Demonstrably not true. Supply chains are a lot more complicated than "made in China" and people greatly overestimate the amount of stuff that is actually made in China. A lot of stuff is made in China but far more is not. China produces about 18-19% of the worlds exports by dollar value. Furthermore people greatly underestimate the amount of stuff that is manufactured domestically. The US also produces somewhere around 18% of the worlds exports.
Alibaba will allow cheaper prices for the same products without having to go through the middlemen and let Ama/Eba skim off profits in the middle.
You're presuming Amazon and Ebay provide no value. I buy a lot through Amazon because their delivery is second to none and their prices are generally reasonable. There is nothing wrong with buying through a middleman if they actually add value and many do. I buy electronic components through distributors on a daily basis for my day job and there is a huge amount of value in that. You buy toilet paper from your local grocery store because the convenience is worth the markup. The internet has flattened the supply chain somewhat but don't think for a moment that there is no need for middle men anymore.
If i can buy a part directly from the manufacturer in China for $3.99, I'm not going to pay $11.99 for Amazon to deliver it to me or even $5.99 for an Ebay reseller.
Sure you will because you want it TOMORROW. You want it from a source you trust. You want the ability to return it and be assured of a refund. You also are conveniently forgetting freight costs which are extremely NOT trivial. I run a manufacturing company that buys parts from around the globe. I buy a lot of stuff including a lot of parts that originate in China, Japan, Germany and other places. We deal with distributors all the time because they add value, shorten lead times, reduce risk and that has real value. Am I supposed to tell a customer that they will have to wait 12-16 weeks for a part (a very typical lead time from China) because I want to source it from some manufacturer I've never heard of in China? Better be buying a LOT of product and be willing to take a lot of inventory risk if you want to do that. It comes by boat unless you want to pay some outrageous markups on airfare.
The entire deal reeks. A holding company in the Caymens associated with a company in a foreign land with profits which may or may not meet accounting standards. The only people dumb enough to take that play would those who cant lose, like banks.
putting the 'B' in LGBTQ+
Way to play the victim card.
I guess it would benefit all the buyers if they don't push up the price too much then again if the price is seen as low / in a way there one would had wanted more I guess one may want to pay more (then again it's ok getting less stock which you think you can do say 20% return on than twice as many but which you can only do 10% on ..)
Then again at least when it comes to purchasing lots of stocks many institutions are ok with paying a premium over the regular price to get what they want and hence paying "too much" relative the regular market price.
I don't know whatever the price normally end up being lower or higher than what the stocks will trade for later on.
I also think it differ how it's done. I don't know for sure but it may be the case that here (Sweden) it may be more common to give rights to purchase the new stocks for the old stock holders whereas say in the US it may be more common to look for institutional purchasers of them.
Both methods exist at least. There's also the possibility of just offering shares for a fixed price and then people can sign themselves up for interest and then have a lottery or give them the stocks they could get out from the ones one wanted to create.
"On the other hand who owns Alibaba's 120 billion? Americans now. If the congress sicks their dogs on ALibaba it's the same as pilfering 120 billion from investors."
Sorry, no pity toward those investors. They knowingly invested in a criminal venture. They deserve not only to lose their money but to be in prison.
Ohhhhhh yeah it's going to sink a bit. Half the sellers are criminal scammers or have no English support whatsoever despite making millions. Chinese labor is going up so manufacturing prices are looking better in the US and every Chinese business owner absolutely hates Alibaba. So "the price might drop"? Yeah, I think that's a category 5 shitstorm blowing in actually. Anyone stupid enough to invest in them will lose their ass.
"... even than Visa's ($17.9 billion), Facebook's ($16 billion), and General Motors ($15.8 billion)"
A payment method, a time waster and a 'products that kill you' company.
Here you can actually buy stuff, and lots of it has free shipping, may it be to Ouagadougou, Timbuktu or Buttfuck, Idaho.
You know, useful.
That is soooo RUDE!!! Are you suggesting Alibaba is not a serious corporate entity who closely monitors their sellers and ensures consumer safety and follows regulations in the countries they operate?
To be fair, I don't see how Alibaba has anything to do with Amazon. One is a legitimate vendor who has built a highly lucrative business model with sustained growth. The other is basically a swap shop site which most sane consumers would never consider typing a credit card number into. I have tried purchasing there 4 times and all 4 times, in response to what appeared to be legitimate postings, the vendors refused to ship unless I paid more or bought more. I honestly can't figure out how to use the site without being scammed.
The problem is, Amazon's share. People think the two companies are the same. Alibaba is more like an eBay than an Amazon.
It's not that there were forty of the thieves ... no no, they stole 40's. Malt liquor goes back quite a ways.
Someone flopped a steamer in the gene pool.
Wow. Did you buy a lot of shares that you are trying to offload? Why the love of Alibaba and/or US bashing?
1. Alibaba is huge in China, but tiny in other markets. This is not a truly global operation.
2. So?
3. So?
4. See 2.
5. If you must know, the HK exchange refused to let them list.
6. Favor? For f***s sake, favor?? HK refused. Goldman gives big institutions very sweet terms and like a whore screws anyone for her pimp (in this case, Alibaba). They probably raised more money than they could in any other exchange.
7. So? This isn't about Amazon; though if you are familiar with it, you wouldn't be harping about NYSE and IPOs. "Investors" are notoriously fickle.
8. Alibaba has a record in ONE developing economy. And you have to understand that retail is a tricky business. There have been so many flops and a few hits that it might take years for a company to get a right strategy when they enter a new market. What about quality? What about customer service? The Chinese market might be used to toys with lead paint, but if Alibaba starts importing large volumes of this stuff, it is going to get some pretty intense scrutiny.
None of which is to say that Alibaba can't work things out - I'm sure they have some very smart people working there. But you seem to think Alibaba is the new king, and I'd say they are a specialist trying to expand - they will most likely carve out a big chunk of the market, but they are by no means a sure winner.
The Chinese government is not a monolith. It's not unusual to see different parts of it pursue conflicting aims. As the saying goes, "the only thing that saves us from the bureaucracy is its inefficiency."
yeah, grammar errors are the easy way to spot the fake FP's.
Sleep your way to a whiter smile...date a dentist!
Sorry, I may have misinterpreted the Wikipedia article summarizing this very famous book.
It's a victimless crime. Or rather, a crime where the victim deserves it. It kinda cancels itself out.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
'cause it's the same cheap crap that you pay lots of money otherwise just 'cause it has a silly picture and/or a certain name on it?
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
AliExpress is irrelevant to investors. Alibaba owns the Chinese equivalents of Ebay, Amazon and Paypal. That's the part they're interested in.
That, and Alibaba's B2B sales. I know several local clothing stores, ecig retailers, mall kiosks & boutique shops which get all their stock almost exclusively via Alibaba.com and I'm sure there's a ton of places I don't know about that do the same. The same applies online. Half the stuff on Ebay and Amazon's marketplace likely come from Alibaba suppliers (many of them use images with alibaba watermarks ffs) so investing gets an investor a small piece of the US retail market as well.