Alibaba shares skyrocket past IPO price in blockbuster trading debut

Mae Anderson, Associated Press | September 19, 2014

JEWEL SAMAD/AFP/Getty ImagesChinese online retail giant Alibaba founder Jack Ma (C) rings a bell to open trading on the floor at the New York Stock Exchange in New York on Friday.

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NEW YORK — Alibaba debuted as a publicly traded company Friday and swiftly climbed more than 40% in a mammoth IPO that offered eager investors seemingly unlimited potential for growth and a way to tap into the burgeoning Chinese middle class.

The sharp demand for shares sent the market value of the e-commerce giant soaring well beyond that of Amazon, eBay and even Facebook.

The stock trading under the ticker “BABA” opened at US$92.70 shortly before noon ET and quickly rose to a high of US$99.70, before paring gains to close at US$93.89. Some 271 million shares changed hands, more than double the turnover on Twitter Inc’s first day last year, although still short of volume for the General Motors Co and Facebook Inc IPOs.

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Ma is a household name in China and may soon be known among big tech names like Mark Zuckerberg after Alibaba’s IPO. Here’s a look at Ma’s career ascent.

Jubilant CEO Jack Ma stood on the floor of the New York Stock Exchange as eight Alibaba customers, including an American cherry farmer and a Chinese Olympian, rang the opening bell.

“We want to be bigger than Wal-Mart,” Ma told CNBC. “We hope in 15 years, people say this is a company like Microsoft, IBM, Wal-Mart. They changed, shaped the world.”

The company’s online ecosystem stands apart from most e-commerce rivals because it does not sell anything directly, preferring to connect individuals and small businesses. It enjoyed a surge in U.S. popularity over the past two weeks as executives made sales pitches centred on Alibaba’s strong revenue and big ambitions.

“There are very few companies that are this big, grow this fast and are this profitable,” Wedbush analyst Gil Luria said.

Alibaba shares gained 46% from the initial US$68 per share price set Thursday evening. Demand was so high that the company raised its price ahead of the debut.

JEWEL SAMAD/AFP/Getty ImagesChinese online retail giant Alibaba founder Jack Ma (C-front) gives a thumbs up on the floor at the New York Stock Exchange in New York on Friday.

AP Photo/NYSE, Ben HiderRepresentatives from Alibaba ring the opening bell to celebrate their IPO at the New York Stock Exchange.

Alibaba’s Taobao, TMall and other platforms account for some 80% of Chinese online commerce. Most of Alibaba’s 279 million active buyers visit the sites at least once a month on smartphones and other mobile devices, adding to the company’s attractiveness as online shopping shifts away from laptop and desktop machines.

The growth rate is not expected to mature anytime soon. Online spending by Chinese shoppers is forecast to triple from its 2011 size by 2015. Beyond that, Alibaba has said it plans to expand into emerging markets and, eventually, into Europe and the U.S.

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The company does not compete with its merchants or hold inventory, serving more as a conduit that links buyers and sellers of all kinds.

“The business model is really interesting. It’s not just an eBay. It’s not an Amazon. It’s not a Paypal. It’s all of that and much more,” said Reena Aggarwal, a professor at Georgetown.

Alibaba’s revenue from the quarter ending in June surged 46% from last year to US$2.54 billion. Its earnings climbed 60% to nearly US$1.2 billion, after subtracting a one-time gain and certain other items.

In its last fiscal year ending March 31, Alibaba earned US$3.7 billion, making it more profitable than eBay Inc. and Amazon.com Inc. combined. As of Thursday, Amazon had a market value of about US$150 billion, eBay US$67 billion.

AP Photo/Jason DeCrowArthur Jiang, of Beijing, China, poses for a photograph in front of the New York Stock Exchange on the day of Alibaba's initial public offering, Friday.

Based in Ma’s hometown of Hangzhou in eastern China, Alibaba began in 1999 when Ma and 17 friends developed a fledgling e-commerce business on the cusp of the Internet boom. Today, its main platforms are its original business-to-business service, Alibaba.com, consumer-to-consumer site Taobao and TMall, a place for brands to sell to consumers.

The IPO’s fundraising target handily eclipses the US$16 billion Facebook raised in 2012, the most for a technology IPO. If all of its underwriters’ options are exercised, it would also top the all-time IPO fundraising record of US$22.1 billion set by the Agricultural Bank of China Ltd. in 2010.

Yahoo stands to be a big winner. The U.S. company, which has been struggling to grow for years, is in line for a windfall of US$8.28 billion by selling 121.7 million of is Alibaba shares. And founder Jack Ma is selling 12.75 million shares worth US$867 million.

AP Photo/NYSE, Ben HiderIn this photo provided by the New York Stock Exchange, Jack Ma, founder of Alibaba is joined by Alibaba executives and NYSE CEO Tom Farley as they gather around the post during their IPO at the New York Stock Exchange, Friday.

Some analysts think the pricing is conservative.

Wedbush’s Luria gives the stock a one-year price target of US$80. Research firm PrivCo said the stock is worth US$100 a share because of all of the private companies that Alibaba has taken stakes in.

Alibaba offered 320.1 million shares for a total offering size of US$21.77 billion. Underwriters have a 30-day option to buy up to about 48 million more shares.

JEWEL SAMAD/AFP/Getty ImagesChinese online retail giant Alibaba founder Jack Ma smiles as he waits for the trading to open on the floor at the New York Stock Exchange in New York on Friday.

The company and its bankers avoided mishaps like those that plagued Facebook’s stock debut on the Nasdaq in May 2012. The social network’s first day of trading was marred by technical glitches. Despite an IPO that was hyped even more than Alibaba’s, Facebook’s stock closed just 23 cents above its US$38 IPO price on that first day and later fell much lower. The stock took more than a year to climb back above US$38.

Gartner analyst Andrew Frank said Alibaba’s success shows that Chinese Internet companies are beginning to challenge Silicon Valley.

“It’s not the first Chinese company we’ve seen in the Internet space but it’s certainly the biggest one that seems to be resonating,” he said. “It’s a symbol that the Internet dreams of wealth and power are not just limited to a few small cities in the West Coast in the U.S.”

Alibaba Group to Surpass Walmart Sales Volume in Two Years: President

Chinese e-commerce giant Alibaba said the volume of its online sales would exceed the global sales of retail company Walmart in two years

© East News/Imaginechina

14:13 01/11/2014

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MOSCOW, November 1 (RIA Novosti) - Chinese e-commerce giant Alibaba said the volume of its online sales would exceed the global sales of retail company Walmart in two years, Business Insider reports.

"Within two years, Alibaba's online retail volume will exceed the sales of Walmart," Xinhua news agency quoted Alibaba’s president Jin Jianhang as saying at a summit in east China's Hangzhou city.

This step will bring the company closer to the target set by its founder Jack Ma a decade ago. He told partners that Alibaba aimed to be among the world’s top 10 e-commerce websites.

"Our market value is very close to being among those of the world's top 10 companies," Jin said.

According to Jin, Alibaba’s business model is plans to cover various aspects of e-commerce, internet financing, smart logistics and big data platforms. The company has completed 20% of the model so far, and it will take 10 more years to finalize the process.

After its record IPO in the US, the e-commerce giant is seeking a multi-faceted expansion. The president said that going global was Alibaba’s primary goal, now reaching some two billion consumers through its online platforms.

In addition, Alibaba plans to invest 10 billion yuan within three to five years to build facilities in rural areas of China to tap rising demand.

"Today, China has 632 million internet users, but 700 million people still have no access. The latter provides a huge market potential for Alibaba to explore," Jin remarked.

In first half of 2014, Alibaba’s total sales volume reached $151 billion. Its trading volume in the second quarter was up 45% year on year.

In 2013, Alibaba reported a gross merchandise volume of $248 billion on its three major platforms that exceeded the combined volume of eBay and Amazon.

Chinese Petitioners Paid to Keep Quiet During APEC Summit

By Luo Ya, Epoch Times | November 2, 2014

 

Individuals who have loudly petitioned the Chinese state to compensate them for harm they have suffered at the hands of corrupt officials are now going to be paid hush money during the Asia-Pacific Economic Cooperation (APEC) Summit.

During the Summit, which meets Nov. 5 to 11 in Beijing, Shanghai authorities have promised to pay local petitioners in cash daily until APEC finishes—if they don’t go to Beijing to present their grievances.

In a phone interview Shanghai petitioner Gu Guoping told Epoch Times that his older brother, who’s also a petitioner in Shanghai, received a phone call from the local petition office on Oct. 30 that he would be paid 200 yuan (US$33) each day from Nov. 1 to 11 if he doesn’t go to Beijing to petition.

The 11 days of payments totaling 2200 yuan ($363) for each petitioner is called a “subsidy fee for people in difficulties,” but in fact it’s fee for “maintaining stability,” Gu said. According to a 2013 Peking University study, the average annual income for a family in 2012 in China is 13,000 yuan, and so this “subsidy” represents more than one-sixth of the average family income.

“Maintaining stability” is the Party jargon used for a wide range of policies, many very harsh, used to suppress protest in China.

Gu indicated that the Petition Office didn’t call him this time, because when officials had tried the same thing prior to the the 4th Plenum, he had refused the money and told the media about it. That meeting of the top members of the Chinese Communist Party took place October 20-23 in Beijing.

A large number of Chinese petition central authorities to seek justice for grievances left unresolved due to official corruption.

Those who go this route are regularly mistreated, and large numbers of petitioners have told media about being illegally detained and even brutally beaten in an effort to stop them from petitioning.

Petitioners from Shanghai gathered in front of the APEC conference site, the Bairong World Trade Center in central Beijing, telling APEC attendees about their grievances. (Screenshot/Boxun.com)

Gu indicated that the Chinese people have lost trust in communist officials. “Every grievance case of Shanghai petitioners is due to official corruption. Shanghai Party Secretary Hanzheng and Mayor Yang Xiongyang always say good, empty words but take no action [on anti-corruption.] Xi [CCP head Xi Jinping] and Li [Prime Minister Li Keqiang] can’t control it either.” Gu said.

“The Chinese communist officials have boasted for decades, and common people no longer trust them,” Gu said.

After breaking through all kinds of blockades from local authorities, 129 Shanghai petitioners gathered at the State Bureau for Letters and Calls in Beijing—the central appeals office—on Oct. 31 to urge the authorities to put effort into solving petitioners’ grievance cases and to have the Shanghai authorities implement the rule of law, according to the U.S.-based Chinese-language news website Boxun.

On Nov. 1, another group of around 30 Shanghai petitioners held banners in front of the APEC meeting place—the Bairong World Trade Center—telling APEC attendees about their grievances.

Photos from Boxun shows petitioners raising banners saying, “APEC attendees, please pay attention to the issues raised by Chinese petitions,” and “Release detained rights-defending petitioners, follow the rule of law.”

Paying petitioners not to protest in Beijing is only one of several steps taken by authorities meant to give the best impression possible of Beijing to the leaders from other countries attending APEC.

A holiday from Nov. 7 to 12 has been issued to to all the institutional organizations in Beijing, such as: all the schools from K-12 to universities, state organizations, non-profit organizations, and so on. Businesses and enterprises are on their own to give time off to their employees, the order says. Beijing residents are also encouraged by the authorities to leave Beijing for travel during the time.

On alternate days cars with odd or even license plates are forbidden from driving, in an attempt to reduce congestion and lower the smog levels.

Fearing terror attacks, Beijing has also banned the sale of bottled gas at gas stations during the APEC meetings. Heavily armed police and plainclothes police are on guard outside the conference hall, and security checks for travellers entering Beijing have also been enhanced, according to the Chinese press.

The new face of B.C. wine: Why Chinese buyers are pouring into the Okanagan’s vineyards

Claudia Cattaneo | November 1, 2014
More from Claudia Cattaneo

[sneaky] 

 

KELOWNA, B.C. — It’s harvest season in British Columbia’s Okanagan wine country. Among the yellowing vineyards, the crushing of grapes, and the tourists flocking to winery shops to sample and stock up on past vintages, Zhenzhen Fu is on a life-changing mission.

She wants to buy and run a winery.

The 28-year-old, who moved to Canada from Weihai, a seaside city in China’s eastern Shandong province, is on her fourth visit to Canada’s western wine region this year. She says her passion for wine runs deep. She can’t wait to make quality reds of her own — first to serve the local market, then for export to China, where red is considered a lucky colour.

“I am a wine lover,” says Ms. Fu, who became a Canadian citizen after moving here in her teens and completed a computer engineering degree from the University of Alberta, before settling in Vancouver.

“It’s the reason I want to get into this business. I want to make a wine that is special.”

Her father in China is backing her purchase: He’s a red wine lover, and an importer of Canadian goods, including lumber. But here in B.C., he’s looking for an investment to pass on to his only daughter. He plans to mentor her and help her sell the vintages they produce into China.

Clad in a delicate-pink Chanel jacket, emerald Valentino bag and black Moussy platform shoes for an eclectic urban look, Ms. Fu hardly cuts the figure of the weathered wine farmer.

But she is part of a growing number of Chinese-Canadians, and investors from China, snapping up wineries in this B.C. valley.

 

Many of them own homes in Vancouver and see the Okanagan wineries, just a quick flight or a half-day’s drive from the city, as an extension of their Canadian presence.

They also see an alluring business case: Demand for wine among China’s growing and more sophisticated middle class is booming. The country has quickly become the world’s leading market for red wine, according to London-based International Wine and Spirit Research. Last year, China consumed 1.86 billion bottles of red, an increase of 136% over the previous five years. Younger Chinese consumers see wine as a healthier choice than the high-alcohol grain liquors favoured by their parents; and the B.C. government has been supportive of Asian investment in the province. For those not already Canadian citizens, the purchase of a winery can help win permanent residency in Canada as business immigrants through the provincial nominee program.

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“Today the Chinese are drinking about one bottle of wine per capita, adult, a year, where we’re drinking about 36 bottles a year,” says Harry McWatters, founder of B.C.’s Sumac Ridge Estate winery. “If we can get them halfway in between, the world wouldn’t have enough wine.”

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Christa Frosch, a Vancouver-based sales representative at Sotheby’s International Realty Canada, and one of a handful of winery specialists in Canada, is on the front lines of the emerging trend of the Okanagan’s changing Chinese flavor. Buyers living in China, or who have immigrated to Canada — together comprising about 80% of her clientele — have purchased or invested in a dozen wineries in the past three to four years in the province, she says. She estimates another hundred are actively looking to invest in the B.C. wine business.

“We have about 10 families that we are working with right now and trying to find the right fit,” she says.

It’s a growing niche for Sotheby’s, which launched its “vineyard collection” in Canada in 2009 to support the growing trade.

There are 240 grape wineries in British Columbia today, from just 17 in 1990 and 86 in 2003. The thirst for investment and ownership turnover is high in a business that is extremely capital intensive.

The average sale price of a winery in B.C. is $10-million. The listing price of the 40 now available for sale, publicly and privately, ranges from $1.85 million to $55-million.

Chinese interest in buying B.C. wineries perked up around 2008–2009, as families from Mainland China built a presence in Western Canada and began scouring for investment opportunities, Ms. Frosch says.

“Once the Chinese families get established, and someone speaks a bit of English, then there is a confidence to get into that business,” she says. “Then we have some families who are in the export business, so it’s a natural add on.”

Selling a winery is complex and takes time. The product is specialized and the operations involve many components, from vineyards, inventory, and equipment to, in some cases buildings, restaurants and retail outlets. With buyers from China unfamiliar with the region, the sale process can involve extensive tours around the Okanagan.

“It has to be the right price point, and then the right location, then you have to have a good team and a good brand, and have decent cash flow,” she says. “And then we have to match the family with the winery, and make sure that all the components are looked after so that it continues to be successful.”

Ms. Frosch makes a point of booking her clients a room at Sparkling Hill resort near Vernon, B.C., the architectural masterpiece owned by Austria’s Swarowski family that is a favourite with Asian tourists. She arranges tastings in wineries with avant-garde names: 50^th Parallel Estate; Bench 1775; Liquidity.

Her Chinese clients often bring along their extended families, with many, like Ms. Fu’s family, evaluating the wineries as a legacy businesses for their children to one day take over.

And when they do make their move, they pay cash — an important edge. Traditional banks tend to be uneasy about a business that requires such a long-term horizon and deep pockets. Farm Credit Canada, Canada’s largest agricultural term lender, is the main financial institution that supports the wine business.

 

The Okanagan’s ripening as a reputable wine region happened just in time to position it as a draw for Chinese capital. The rapidly emerging affluent middle class in China was soon followed by a taste for western indulgences. Now one of the world’s top wine markets, there are an estimated 1 million planted acres of vineyards in the country (compared to about 10,000 in British Columbia and 40,000 in California’s Napa region), but production hasn’t kept up with demand, the quality is often poor, and there is a widespread problem with counterfeit wines, made locally but labeled as European.

“In China you cannot control the quality of the red wine, so they import a lot,” says Ms. Fu. “There are too many kinds and there are a lot of fake red wines… And when we came to the wine tour, in the Okanagan, we saw a lot of wineries in the Okanagan. They are so beautiful, and we just fell in love.”

Canadian wine exports to China have been increasing from a modest base, says Mr. McWatters, a pioneer and leader in the province’s wine industry, with 47 vintages under his belt.

Because B.C. has limited capacity to expand, its wine makers have been focusing on quality, and the Chinese are catching on.

“[The Chinese are] looking for wines of distinction, wines that have breeding and a unique characteristic,” says Mr. McWatters, who is starting a new winery after launching well-known establishments like Sumac Ridge Estate in 1980 and See Ya Later Ranch Estate Winery in 1995.

As they discover B.C.’s wide range of varietals, from Pinot noirs and Merlots to Rieslings and Gewurztraminers, they become interested in owning the production, he says.

“There have certainly been lots of Asians looking at the investment here over the last five to 10 years, but it’s really only in the last three to four years that we have seen real traction take place,” Mr. McWatters says. “It’s a direct reflection of the way wine is growing with such tremendous interest in China.”

 

Jeff Bassett for National PostVal Tait says she’s only seen positive things from the new owner of her former winery, Bench 1775 — a businessman from Beijing who paid more than $8-million for the operation in February.

As is often the case with change, there have been hints of nervousness in the region that Chinese ownership could bring unwelcome consequences — job losses for locals, slipping quality, loss of local control.

One winery spokesman says there has been negative reaction recently from wine consumers “when they hear a local winery is not locally owned.”

Ms. Frosch acknowledged that the first Chinese buyers were greeted with skepticism because of their difficulties in communicating in English, the long timelines required to close a sale and their lack of understanding of the business.

But Val Tait says she’s only seen positive things from the new owner of her former winery, Bench 1775 — a businessman from Beijing who paid more than $8-million for the operation in February.

 

One of the Naramata, B.C.’s iconic wineries because of its sweeping vistas, Bench 1775 is located on a 31-acre property with a tasting room overlooking Lake Okanagan. Already, it exports 8,000 cases a year to China, its biggest export market — as much as it sells domestically.

The owner (who prefers to stay anonymous) offers expertise in the retail end of the Chinese market, where he has been exporting B.C. wines for a decade, she says.

And as is often the case with Chinese purchases, Ms. Tait, a viticulture expert with an extensive history of producing red table wines, was asked to continue as general manager and told to keep up the high-quality product.

With Canadian brands competing with many better-known wines in China, “we have to produce a premium product,” she says. “It’s a very discerning market. Brand and quality are very important.”

Chinese investors “are bringing in capital that we need to be able to operate in the global stage,” Ms. Tait says. “It ups everybody’s game.

She credits the new owner with having a remarkably long-term vision, and unusual patience. While spending most of his time in China, he participates in all aspects of the business when he is at the winery — from bottling wines to picking grapes.

“Now I am thinking: ‘Where will this winery be in 100 years?’ whereas before it was, ‘Where will be in 10 years?’ It changes everything in your approach when you start thinking 100 years down the road,” Ms. Tait says.

“In China there are more millionaires than the Canadian population,” says industry pioneer, Guenther Lang, whose Lang Vineyards was the province’s first to sell its products directly to the public, setting off a trend that has led to a booming wine-tourism market. “Business people want to get investments outside of China, and one of the preferred locations is B.C.; Canada is investment friendly and the last big banking crisis confirmed that — our big banks … performed best in the world.”

After Mr. Lang sold his winery to a Canadian investor in 2005, the buyer ran into trouble during the recession.

Enter Yong Wang, a Chinese businessman, who bought it out of receivership from the Bank of Montreal in 2009. Mr. Wang bought new equipment, invited Mr. Lang to return as a consultant and installed his nephew, Mike Lang, as general manager.

Mr. Wang kept the winery’s 10 employees, and is consulted on major decisions, but for the most part, Mike Lang says, the owner allows the staff to do what it takes to be successful.

“We started from scratch and worked our way back,” he says. “Our wine sales have been up again. We are getting the market we used to have. We are bringing some new varietals to the table, so that is drawing in a lot of customers.” He exports about 500 cases a year to China, where Mr. Wang’s daughter opened a store that sells the B.C.-produced wine. The plan is for her eventually to move to B.C.

As for Zhenzhen Fu, she is continuing to look for a winery with a great view, land to expand and to build guest rooms, and a solid balance sheet. She is also taking sommelier courses to refine her knowledge of wine. She’s fallen in love with winemaking far more than she ever had with computer engineering. At the very least, she says, when she buys her winery, “maybe I can fix my own computer.”

China celebrates successful Moon probe

Beijing commemorates return of its 'Little Flyer' lunar orbiter but insists it is not seeking a 'space race' with India

"Xiaofei" safely on the ground Photo: Xinhua news

By Tom Phillips, Shanghai

9:20AM GMT 01 Nov 2014

 China has taken one more step in its ambitious plans to become a global space power by completing the successful re-entry and landing of an unmanned space probe.

The “Xiaofei” or "Little Flyer" lunar orbiter began re-entry into the earth’s atmosphere at 6.13am on Saturday and subsequently landed in Inner Mongolia, state media reported.

The probe was launched eight days ago and travelled more than 520,000 miles during its mission around the Moon.

The mission to the Moon was “another step forward for China's ambition that could eventually land a Chinese citizen there,” Xinhua, China’s official news agency, said. It was “the world's first mission to the Moon and back for some 40 years”.

Saturday’s landing is the latest advance for a space program that China’s leaders see as an important way of commanding international respect. Some Chinese scientists have said they hope space exploration might help them discover precious natural resources that could help satisfy the country’s ravenous hunger for raw materials.

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Beijing has repeatedly insisted that it is not trying to compete with other nations. “Few countries can rival China's space program although China never intended to participate in any ‘space race,’” Xinhua claimed.

However, few doubt that a highly charged Asian space race is now underway, with Chinese and Indian scientists battling it out for supremacy.

China was leapfrogged by its regional rival India in September when that country successfully sent a spacecraft into orbit around Mars, something China had previous tried but failed to achieve.

“The success of our space program is a shining symbol of what we are capable of as a nation,” Narendra Modi, India’s Prime Minister, boasted at the time.

China become first country to “soft-land” on the Moon in nearly four decades last December, deploying a six-wheeled buggy called the “Yutu” or “Jade Rabbit” to take photographs and soil samples.

However, the “Jade Rabbit” ran into trouble shortly after touchdown. Its functions had now “degraded considerably,” Xinhua admitted on Saturday.

Beijing’s latest space mission was intended to “test technologies” that the country hopes to use in a 2017 mission to the Moon during which an unmanned spacecraft will land, collect soil samples and return to earth, Xinhua said.

The space probe had “gathered a lot of experimental data and laid a solid foundation for future missions” Wu Yanhua, deputy head of China's State Administration of Science, Technology and Industry for National Defense was quoted as saying.