Alibaba enjoyed a pop in stock price this morning, beginning trading at $92.70 a share — 30 percent higher than its initial public offering price of $68.
The stock quickly surged to a high of $99.70 a share by noon, before dipping back down to around $92. “I think the fact that [the stock price is] in the 90s is something that no one called. Bankers were aiming for a 10 percent pop, maybe 75, high 70s,” says PrivCo CEO Sam Hamadeh.
He says the stock popped because it was undervalued and there was high demand for the small offering of 320 million shares. Hamadeh says investors may have failed to account for Alibaba’s many investments, which led to a lower valuation. “There were $51 billion dollars in stakes that weren’t factored in,” says Hamadeh.
Alibaba has been on a buying spree, snapping up companies like UCWeb and contributing to investment rounds for companies like Lyft and Tango. This diversification is part of what makes Alibaba attractive to investors.
“It’s almost a perfect balance of a company that has diversification and attractive margins, but is in an innovative space that has huge growth potential,” says Andrew Frank, research VP at Gartner Research.
As we’ve noted before, Alibaba is a company that has a lot of moving parts. It’s part e-commerce, part cloud services, and also has its hands in location and mapping services, among other Internet businesses, and focuses on targeting small and medium markets, largely throughout China.
“There are dozens of mid-sized cities and remote cities that can only be reached by Alibaba’s private delivery system,” says Hamadeh — meaning Alibaba has become a main channel for getting goods delivered to under-served areas in China; places Fedex doesn’t deliver to, for example. Alibaba has positioned itself as a company that wants to help small businesses, another component driving the company’s popularity among investors.
“[CEO Jack Ma] wants to help American businesses, small businesses in the U.S. and other countries, access the Chinese market and that as a vision has a resonance with people who would like to see those markets be more open,” says Frank. Many investors see China as a huge market for American business growth, one than many American companies have been unable to tap.
Alibaba’s stock closed at $93.89 per share.