Alibaba Passes Facebook in Market Value on First DaySarah Frier
Alibaba Group Holding Ltd. surpassed Facebook Inc. by market capitalization on its first day as a public company right from the minute it started trading and closed with a valuation of more than $231 billion.
Alibaba surged 38 percent above its initial offering price to close at $93.89 in New York yesterday. The Chinese e-commerce company, which began the day with a value of $228.5 billion, now trails only Google Inc., Apple Inc. and Microsoft Corp. in size among U.S.-traded technology companies. Facebook passed $200 billion in market value earlier this month and is worth $201.6 billion as of yesterday’s close.
Alibaba’s public-market debut contrasts with Facebook’s May 2012 sale. Facebook, which was valued at $104 billion at its IPO, lost half that in the following months, and the stock took more than a year to close above its IPO price. While Alibaba has risks related to corporate governance and the Chinese government’s unpredictability, that hasn’t stopped investors, said Jeff Sica, chief investment officer at Sica Wealth Management.
“There is much more of an ignorance-is-bliss attitude, there’s much more of a feeding frenzy where investors are afraid to miss out on the next big thing,” said Sica, whose fund manages more than $1 billion. “There’s been hunger built up in the market for Alibaba and they’re ignoring the fact that there are a lot of negative variables.”
Facebook, the world’s largest social-networking site, marked its debut on the Nasdaq exchange, where it was plagued with technical snafus on top of investor skepticism about the company’s strategy for making money via advertising on mobile devices.
Facebook’s ascent to $200 billion came as it built out its business model for advertising on handheld devices. Now the Menlo Park, California-based company gets more than half of its ad revenue from mobile phones, compared to almost nothing at the time of its IPO.
Alibaba’s $21.8 billion sale was the biggest-ever IPO for a technology company, buoyed by growth in China’s e-commerce market. With an IPO price of $68 a share, Alibaba was valued at 29 times expected earnings for the year through March -- below multiples fetched by Chinese and U.S. rivals including Tencent Holdings Ltd., Baidu Inc., and Amazon.com Inc. Analysts forecast that Alibaba’s earnings will grow 50 percent in fiscal 2015 from the previous 12 months.
Vanessa Chan, a spokeswoman for Facebook, and Bob Christie, a spokesman for Alibaba, declined to comment.
Alibaba’s valuation also eclipses that of its U.S.-based e-commerce rivals. Amazon was valued at about $153 billion as of yesterday, while EBay was worth $65 billion.
Alibaba’s market debut will offer investors a public-market alternative to Amazon, while giving the Chinese company the cash it needs to expand to countries including the U.S., where it could potentially compete with Amazon and EBay. Amazon is the most prominent U.S.-based Web retailer, disrupting brick-and-mortar rivals including Wal-Mart Stores Inc. and parlaying its success into cloud computing, smartphones and grocery delivery.