Chinese e-commerce company Alibaba made its stock market debut on Friday in what turned out to be the largest initial public offering of all times. Having initially planned to raise $21.8 billion at a price of $68 per share, Alibaba’s underwriters decided to exercise an option to sell additional shares pushing the total IPO value to $25 billion.
After opening at $92.7 on Friday, Alibaba’s share price quickly rose to almost $100 before coming back down and closing at $93.89, which represents a 38% increase from its IPO price. Compared to other high-profile internet IPOs, Alibaba’s first day pop was big but not huge. Most recently, Twitter’s shares had soared 72.7% on the company’s first trading day last November. Facebook’s shares on the other hand had hardly moved beyond the IPO price when the company went public in 2012.
However, it needs to be remembered that a big first-day pop is not necessarily an indicator for a successful IPO. While it does create positive headlines, a big pop can also mean that the IPO was not accurately priced and that the issuing company could have raised more capital. Alibaba’s underwriters appear to have found the right balance here. The company’s share price climbed high enough to create positive headlines without leaving too much money on the table.
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