NEW YORK – Five years ago on Thursday, Chinese online commerce giant Alibaba made the biggest initial public offering in history on the New York Stock Exchange and today its value has more than doubled with the firm remaining virtually untouched by the ongoing trade war between the US and China and by the feared slowing of the Chinese economy.
Alibaba received $25 billion for the shares offered in the IPO on the NYSE, each of which went for $93.89, considerably above expectations, thus providing the firm with $231 billion in capitalization.
Contacted by EFE to discuss its five-year anniversary and the challenges it faces, the corporation released a statement saying that it has “transformed” itself into a “complete digital economy,” with business and affiliates covering everything from online purchasing, payments and logistics to training, local services and traditional commerce.
With a payroll of 100,000, the firm’s market value currently stands at some $461 billion, double its value upon its market debut, thus putting it in the ranks of huge US firms such as Microsoft ($1.05 trillion in market cap), Apple ($988 billion), Amazon ($909.8 billion) and Alphabet ($801.8 billion).
The value of Alibaba shares has skyrocketed by 30.59 percent so far this year and the firm has “captured the attention” of investors in the United States, who see how it is performing with the rise of the Chinese consumer class, Investing.com analyst Jesse Cohen told EFE.
During its most recent fiscal year, which ended on March 31, Alibaba increased its profits by 37 percent thanks to income from retail sales in the Chinese market, which accounts for the bulk of its business although the firm says that it is “changing the way of buying not only in China but all over the world” as it globalizes.
Between April and June, the first quarter of its current fiscal year, the company also increased year-on-year earnings and exceeded the expectations of Wall Street analysts, who had been looking for signs that the firm was slowing its activities due to the US-Chinese trade war.
Just like Amazon, Alibaba has diversified its main e-trade business into other income flows, such as cloud services and food shipment, thus establishing itself well for the future despite the Washington-Beijing trade tensions, Cohen said.
The head of the Wedbush Securities investment firm, Daniel Ives, told CNBC that Chinese e-commerce companies are “under pressure” because of worries about the region’s growth and the slowing of the Chinese economy, but he added that the “bark is worse than the bite” right now.
Meanwhile, Alibaba CEO Daniel Zhang recently acknowledged that “geopolitical uncertainties” have put additional pressure on global growth, although he agreed that this is “both a challenge and an opportunity for the Chinese economy.”
He said that “consumption and the service sector will transform themselves into the new growth engine,” and he added that the firm is “well positioned” to take advantage of this trend.
Many US analysts share that optimism about the fiture, with Thomas Chong, with Jefferies, saying that “Alibaba has multiple growth drivers for the coming years” and recommending it to interested parties.
The company’s “goose that lays the golden eggs” is its “main market” – namely, China – where consumption is improving and the firm is showing “solid execution” and “the ability to digitalize the retail sector,” Chong said.
“Its ecosystem of synergies allows it to easily accelerate in medium-sized cities and local services. It has clear market leadership in cloud technology, which is the backbone of digitalization in different sectors,” he said.
Alibaba’s five-year anniversary comes as businessman Jack Ma, who founded the company 20 years ago and today is China’s richest person, steps down as executive chairman after previously handing over the post of CEO in 2013.