Have you heard of Alibaba?
No, we are not talking about the Arabic tale of the forty thieves and their mysterious cave that hoarded untold treasures - but of the Chinese company that listed on the New York Stock Exchange last week.
In its Initial Public Offer (IPO), this Chinese e-commerce company raised $25 billion in the United States - considered the largest initial stock offering to the public in the world. Before we look at what IPO means, lets understand a little bit about e-commerce.
Ecommerce Around The World
Do you shop for stuff on Amazon? Did you know that shopping online is fast becoming the most popular way to buy things these days? Last year, Amazon become the 9th largest retailer in the US. But shopping online is not unique to the US. The trend is very common in China too.
Internet shopping in every country is a little bit different. China’s largest ‘online marketplace’ is Alibaba, a platform that helps small businesses as well as branded manufacturers reach consumers.
But Alibaba is different from Amazon. Amazon has its own massive warehouses and sells its products directly to customers, Alibaba, however, is a gathering place or a bazaar for buyers and sellers. So, in some sense, it is more like a combination of eBay and Amazon rolled into one. In fact, Alibaba’s marketplace is much larger than eBay and Amazon combined!
What Is An IPO?
An initial Public Offer (or IPO) is the first time that a private company offers its shares to the public. Want to know why companies issue shares and try to go public? Don't miss our article here that explains it all.
Each company can decide which stock exchange to list (or sell) its shares in. What is unique about Alibaba is that it decided to sell its shares on the New York Stock Exchange (NYSE). Since the company does not do business in the US, it is not well-known like Amazon. Despite being a foreign company, its IPO has made history as the largest both in the number of shares listed for sale, and value.
The NYSE stock exchange has emerged as the preferred stock exchange for companies to raise money, closely followed by the Hong Kong Stock Exchange. Taking the company public on the NYSE has made Alibaba a 'Global' company, even though it does not do business outside China.
For Jack Ma, the English teacher turned entrepreneur who started Alibaba, going IPO has made him the richest man in China. His personal wealth is now valued at about $22 billion!