In September 2014, Chinese e-commerce giant Alibaba’s initial public offering (I

Question

In September 2014, Chinese e-commerce giant Alibaba’s initial public offering (IPO) on the New York Stock Exchange became the biggest ever at $25 billion. Compare this to Facebook’s $16 billion IPO in 2012, Google’s $1.7 billion in 2004, and Amazon’s IPO of $54 million in 1997. Why all the excitement over this company? Founded in 1999 by Jack Ma, Alibaba is an online wholesale trading platform that makes it easier, faster and cheaper for international buyers to find Chinese suppliers. Alibaba’s focus is on serving small and medium size enterprises (SMEs) or, in the words of Jack Ma, “shrimps” not “whales.” As we discussed starting from the beginning of this course, the Internet is one of the biggest drivers of globalization, opening markets that were essentially closed or very difficult to find or reach. In this unit’s assignment, we will explore how online trading companies like Alibaba can help businesses engage in importing and exporting. Support your viewpoints by using the readings and resources provided in our online lecture, book, Kean library and reputable sources found on the Internet. When ready, fully answer the following questions. How does a platform like Alibaba make it easier, faster and cheaper for SMEs to engage in importing and exporting? Identify and explain at least three. Imagine you are an international business manager seeking a new supplier. Identify a product you would like to import, then visit www.alibaba.com and locate a seller. Do the same with www.trade-india.com and www.europages.com. Which site did you find the easiest to use? Name three criteria you would use to help you decide between buying from a seller in China versus India or Europe? A major barrier to international trade activities is the issue of trust. What can platforms like Alibaba and sellers on these exchanges do to raise trust with buyers? How can sellers be sure they are dealing with ethical buyers? Another way of asking this is, what can be done to reduce the risk of fraud for both buyers and sellers?

Explanation / Answer

Alibaba has secured its situation as the arenas biggest-ever inventory market flotation, after it announced that bankers going for walks the deal for the chinese language ecommerce organization had exercised an option to promote further shares.

The manufacturer's bankers chose to sell extra shares, in keeping with three individuals aware of the topic, after receiving overwhelming curiosity within the preliminary public offering from world traders. Alibaba's shares debuted on the new York stock exchange on Friday, soaring with the aid of greater than a 3rd.

Investor demand was once so sizzling that shares did not start buying and selling for more than two hours because the organization's banks struggled to smell out a seller the longest such prolong in NYSE history.

Shares had been sold to traders for the duration of the IPO approach at $sixty eight every, but briefly reached $99 during the opening minutes of buying and selling. Alibabas shares, buying and selling underneath the ticker BABA, finished the day at $93.89, up 38 per cent.

Shares slipped on Monday, falling about 2 per cent to $92.

Situated on Friday's closing share price, the organization had a market capitalisation of more than $230bn larger than fellow tech giants facebook and Amazon, and significant US companies corresponding to JPMorgan and Procter & Gamble. Had it listed on the Hong Kong trade, as as soon as planned, 15-yr-old Alibaba would have come to be the city's third-largest company by way of market cap, in the back of handiest China cellular and PetroChina.

The so-known as greenshoe, or overallotment, will likely be exercised in full, and increases the deal measurement of China's dominant ecommerce platform by 15 per cent, taking the total to $25bn. The determination to activity used to be first suggested in the Wall street Journal.

A greenshoe option makes it possible for bankers taking corporations public to broaden the flotation dimension once trading is beneath approach, traditionally in keeping with strong investor demand. This is completed via selling more shares than are at the start on hand, that are then purchased from the company by the underwriters and delivered to investors.

With the further share sale, Alibaba's deal leapfrogs above earlier document holder Agricultural bank of China, which raised $22bn in its 2010 list in Hong Kong. Of the most important IPOs in historical past by cash raised, the highest three at the moment are all from mainland chinese language corporations, with chinese language lender ICBC in third place, even as AIA the Hong Kong-listed insurer is in fourth, consistent with knowledge from Thomson Reuters.

At the time it was once planning its checklist, Alibaba had set out with the goal of $25bn in intellect, in step with one man or woman with advantage of the subject. In the lead-as much as its debut, the company met with 1000s of buyers all over the world for the duration of a two-week roadshow, where executives including founder Jack Ma sought to assuage fears about company governance and ownership constitution.

With shares now ultimately available to exchange publicly, stock costs of listed organizations beforehand noticeable as good proxies for Alibaba were struggling.

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