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Published On: Tue, Sep 2nd, 2014

Once again Ma times Alibaba’s IPO on NYSE in a huge stock market rally

Jack Ma is setting Alibaba’s second IPO with a similar timing compared to the first one in Hong Kong. This time, however, wary investors are expected to make reasonable valuations.

Once again Ma times Alibaba’s IPO on NYSE in a huge stock market rally

Jack Ma is preparing Alibaba’s debut on the New York Stock Exchange in much the same way as seven years ago, when the company went public in Hong Kong, a week following the all-time high reached by the Hang Seng Index. Then, by 2008 end, it declined by 55 percent causing the company to erase over $20 billion of its market value.

In 2012, Ma delisted Alibaba from the Hang Seng Index at its IPO price. By then, over 2,300 vendors had defrauded purchasers via the website, and stocks stayed 40 percent under the 2007 peak. Although valuations for technology shares are at a 4 1/2-year high, the bull market offers more auspicious prospects for Alibaba.

On August 29, the Nasdaq Composite Index shot up to its the highest since March 2000; the Standard & Poor’s 500 Index also hit record highs. The Hong Kong benchmark Hang Seng Index has advanced by 5.8 percent so far this year.

On Alibaba digital market place all kinds of items, not just everyday goods, are sold. The raised IPO expectations are based on optimism for the company’s profits, as the numerous Chinese shoppers increasingly buy on the Internet. Advertisers stimulated spending, and Alibaba’s net income became almost triple, $1.99 billion, in the quarter through June.

In 2007 investors crowded for the Alibaba Hong Kong IPO, placing orders that reached 257 times the amount of available stocks. As a result, shares nearly tripled and sales volume was so huge that there were order delays. The situation lasted for slightly less than a month; after that, Alibaba crashed 91 percent from its November 30, 2007 peak.

In June 2012 Ma repurchased the stake of 27 percent listed Alibaba shares at HK$13.50 per share, the price paid by investors in the IPO, with 46 percent premium.

The Alibaba’s NYSE IPO anticipated value is $154 billion, 22 percent below analysts’ valuations, which could help avoid Facebook’s listing misfortune. Alibaba expects the meetings with investors in the week starting September 8, then tentative pricing on September 18 and trading kicking off the following day.

After founding Alibaba 15 years ago, Ma is now China’s richest person, his fortune amounting to $21.8 billion. His ownership in the e-commerce giant is 8.8 percent.  The company belongs to the 27 Alibaba partners with the right on nominating the majority of the company board, a governance structure refraining the company from seeking listing in Hong Kong.

According to Chinese government projections, e-commerce transactions by Chinese people, the largest Internet users pool globally, will amount to 18 trillion yuans (equal to $2.9 trillion) next year, yielding an 80 percent rise since 2013. Alibaba is anticipated to expand further, due to that huge market share.

According to analysts, investors are not going to make the same mistake of unrealistic expectations as with the first IPO, so valuations are expected to be reasonable.

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