The largest tech IPO of the year will come from a company y that many Americans have never heard of. Alibaba- a Chinese e-commerce behemoth that produces more sales and net income than Amazon and eBay combined- has decided to go public in the U.S. after months of speculations that it would list in Hong Kong. The company is said to be raising a high amount of money. China’s e-commerce giant Alibaba began trading its shares on Friday on the New York Stock Exchange. “We are expecting it to be the largest tech IPO ever, the largest Chinese IPO of the year,” said Max Wolff who is the chief economist and strategist at Citizen VC.
Here are five things to know about Alibaba, and why its initial public offering made history:
1. The Biggest: Alibaba has raised $21.8 billion in its first appearance and this makes it the biggest U.S.-listed IPO in history after the IPO of credit card processing company Visa in 2008. If Alibaba’s investment banks were to exercise their option in order to sell an additional 48 million shares, it could make Alibaba’s IPO the biggest in the world, beating out the $22 billion IPO of Agricultural Bank of China in 2010 which will prove to be the biggest hit ever in the success history of Alibaba.
2. Don’t forget Yahoo: There is no doubt that it has been a real big day for the e-commerce ninja Alibaba and its founder Jack Ma, but Yahoo’s investors are feeling pretty good after Alibaba’s IPO. Yahoo was an early investor in Alibaba, paying $1 billion for a stake in the company in 2005. Yahoo likely have made up to $8.3 billion to $9.5 billion in Alibaba’s IPO, and it now expected to hold the same and it will even own a 16 percent stake in the company which is worth $37.7 billion. It is really an impressive stage.
3. Alibaba Eclipses Silicon Valley: Alibaba now owns a very high market capitalization of roughly $219.8 billion, according to Fact Set. That makes the company bigger than some of the U.S. technology industry’s most successful names, such as Facebook, eBay, and even Amazon.com.
4. All in one: Investors are interested in Alibaba because the company dominates many businesses in China that, here in the U.S., are run by individual companies. Alibaba owns the websites T-mall and Taobao, which are similar to Amazon.com and eBay, respectively. The company also earns money from transaction fees related to its various businesses through Alipay, which is like PayPal. That’s just three of Alibaba’s many subsidiaries.
5. Big profits: Unlike the U.S. e-commerce giant Amazon, Alibaba has been consistently profitable. The company had $8.5 billion in sales in its latest fiscal year ending in March, with net income of $3.8 billion. The year prior, Alibaba had $5.4 billion in sales and $1.4 billion in profits. In comparison, Amazon sold $74.4 billion in goods in 2013, but made only $274 million in profits that year.