Alibaba Group Holding Ltd. begins trading at New York Stock Market on Friday with an evaluation of $167.billion, which exceeds Amazon's capitalization of $150.2 billion. The China-based online retailer's initial offering was $68 a share.
The giant online retailer's $68 a share raised $21.8 billion, the largest ever in U.S. history. No IPO in the U.S. has reached the $20 billion mark, while the world record for the highest IPO is held by the Agricultural Bank of China with $22 billion in 2010.
Alibaba is household name in China but not that popular in the U.S. However, analysts had been anticipating the value of the online retailer in the past few months as it planned its first public offering. For every U.S.-based website you can think of, there's an Alibaba equivalent.
Kirthi Kalyanam, director at Santa Clara University, told Bloomberg, "This means that there's a new kid on the block that can give Amazon a run for its money."
By revenue, Amazon remains as the biggest e-commerce company in the world with its sales amounting to $74.5 billion in 2013, a lot higher compared to the China-based e-commerce company's $52 billion. However, Alibaba is expected to grow by 33% in 2016, bigger than the 20% estimate for Amazon.
The increase in revenue for Alibaba is expected due to the fact that China is expected to overtake U.S. in online spending by 2017. Though still a developing country, more Chinese are going online to make their first online spending.
Alibaba's websites rely on low-cost structure as it doesn't produce the products it sells. The websites under the company such as Taobao Marketplace, Juhuasuan, and Tmall connect buyers to merchandisers. Alibaba earns from the fees collected from the sellers and the advertisments placed by merchants who want to be viewed more by buyers.
A president of an online retail consulting firm said Alibaba has a stronghold on the Chinese market and knows how to make it grow.
