Alibaba (BABA) was originally characterized as China’s answer to Amazon (AMZN). Following its initial public offering (IPO) on the New York Stock Exchange (NYSE) in September 2014, the online marketplace grew exponentially in both the products and services it offers and the companies it owns.
Why would Alibaba, or any foreign company for that matter, choose to go public on a U.S. exchange rather than one closer to home? While there may be numerous answers to this question, three possible motives stand out: control, reputation, and range of motion.
- Alibaba was originally characterized as China’s answer to Amazon.
- The company went public in the U.S. by listing on the NYSE in September 2014.
- Many believe that Alibaba's founders chose to go public in the U.S. to retain control of the company.
- Investors tend to trust companies listed on the NYSE because of the exchange's reputation and requirement for transparency.
- There is a greater range of motion for companies listed on the NYSE, as it allows for more seamless acquisitions of U.S. companies.
Many believe that Alibaba's U.S. IPO allowed founder Jack Ma to maintain control of the company. Alibaba’s pre-IPO structure gave Ma and co-founder Joseph Tsai control of the company despite not owning a significant percentage of shares. Ma’s reported first choice of exchanges, Hong Kong, frowns on control methods that aren't based on majority ownership.
Alibaba's market capitalization on March 31, 2022, approached almost $300 billion. On this date, a single share of Alibaba stock was valued at $108.80.
The NYSE and the U.S. generally allow companies to use share classes to maintain control of publicly traded companies. Even with foreign companies that plan to hold a majority of shares, the share class structure offers an opportunity to raise capital without giving away significant power to the new shareholders.
Not only is there an element of prestige in being an NYSE-listed company, but there is also a very practical advantage. Companies that trade publicly in the U.S. fall under the regulatory supervision of the Securities and Exchange Commission (SEC).
Although this often means learning new processes and more paperwork for foreign companies making the leap, it pays off in the long run. The increased scrutiny and transparency SEC oversight provides is seen as a plus by investors, who subsequently have more trust when reading a company's financials and making their investments.
Alibaba's Record IPO
Founded in 1999, Alibaba went public in the United States in 2014. It's IPO raised over $21 billion, a record at the time.
A company like Alibaba can use that trust to position itself even more clearly as Amazon's primary rival. The U.S. listing can make it easier for investors looking for exposure to online marketplaces to choose Alibaba’s growth story over Amazon’s. The NYSE itself states the benefits of their exchange include improved branding and visibility, access to capital, and increased liquidity opportunities.
Range of Motion
A U.S. listing also allows companies like Alibaba a bit more range of motion when it comes to mergers and acquisitions (M&A). Having U.S. dollar shares on a U.S. exchange can simplify any future acquisitions of U.S. businesses and can lessen the scrutiny these deals might face if a foreign listed company made an offer for a U.S. listed business.
Alibaba became a partner of the International Olympic Committee (IOC) in 2017, committing to transitioning the Olympics into the digital era. This partnership will run until at least 2028. Alibaba is a Founding Partner of the Olympic Channel.
When Did Alibaba Go Public?
Alibaba (BABA) went public on Sep. 19, 2014 on the New York Stock Exchange (NYSE).
How Much Did Alibaba Shares Cost at IPO?
Alibaba's IPO was priced at $68 per share and raised $21.8 billion.
Can You Buy Alibaba Stock In the U.S.?
Anyone with a brokerage account can purchase Alibaba stock in the U.S. You only need to search for the ticker symbol BABA and then you can trade the stock like any other NYSE stock.
The Bottom Line
There's plenty to be optimistic about regarding Alibaba. The company is expanding overseas with its AliExpress marketplace for oversea buyers. It's also expanding Kaola.com for cross-border purchases. Alibaba is expected to continue to grow its number of merchants, brands, and enterprise customers for its cloud platform.
While there may be many reasons why Alibaba went public in the U.S., perhaps the most interesting thing about the company's IPO isn’t that it listed in the U.S., but that it's listed with the NYSE rather than the Nasdaq—a more traditional home for internet companies. Some suggested that Nasdaq's mishandling of Meta's (formerly Facebook) 2012 IPO made Alibaba skittish.
Since its IPO, Alibaba experienced tremendous success throughout most of 2020. However, after topping $300/share in October 2020, Alibaba shares have tumbled to below $87 in March 2022. Regardless of the recent performance of Alibaba's stock price, when foreign companies list on U.S. exchanges, money is generated for the exchanges and investment banks involved. This makes it a win not just for the foreign company but for the U.S. as well.