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Alibaba Completes 7 Years Of Going Public In US: A Look Through Troubled Journey And What's Ahead For The Tech Giant

On Sunday, Alibaba Group Holding Ltd (NYSE: BABA) completes seven years of being listed on the New York Stock Exchange. On Sept. 19, 2014, the company’s shares closed at $93.89 on debut, up 38% from the IPO price — the Jack Ma-founded Chinese conglomerate has come a long way since.

Humble Beginnings: Ma, a former English teacher, founded Alibaba 22 years ago on June 28, 1999.

In a 2006 interview with CNN, Ma revealed why he choose the name Alibaba. “One day I was in San Francisco in a coffee shop, and I was thinking Alibaba is a good name. And then a waitress came, and I said do you know about Alibaba? And she said yes. I said what do you know about Alibaba, and she said ‘Open Sesame.’ And I said yes, this is the name!”

See Also: How To Buy Alibaba (BABA) Stock

Ma told CNN the company also registered the name AliMama “in case someone wants to marry us!”

But before there was an Alibaba, there was China Pages, a company that Ma told CNN was probably the first internet company in China. China Pages’ mission was to let the world know about Chinese companies and it was started by Ma with a $2,000 loan from his brother-in-law.

See Also: The Business Philosophy Of Jack Ma

Alibaba’s18 founders cobbled up $60,000 to start the business in 1999, as per Ma. By the time Alibaba was listed on the NYSE, in one of the world’s largest IPOs, the company had acquired a market value of $231 billion. That offering raised $25 billion.

Ma stepped down as Alibaba CEO in 2013 and currently the company is led by Daniel Zhang. In 2018, Zhang was chosen to succeed Ma as the executive chair of the Alibaba Group. 

In November 2019, the company listed its shares in Hong Kong amid growing tensions between the United States and China over trade and other matters.

A Burgeoning Behemoth: Today, Alibaba is worth $424.9 billion in terms of market capitalization. It is the second-largest company in China behind the Shenzen-based Tencent Holdings Limited (OTC: TCEHY) — a tech and internet giant. 

As per the current Forbes Global 2000 list of the world’s largest public companies, Alibaba Group is ranked at the no. 23 spot, ahead of names such as Goldman Sachs Group (NYSE: GS), Facebook Inc (NASDAQ: FB), and Sony Corporation (NYSE: SNE).

Jack Of All Trades: Alibaba has a lot of fingers in a lot of pies. The company’s products and services span arenas occupied by companies such as PayPal Holdings Inc (NASDAQ: PYPL), Amazon.com, Inc (NASDAQ: AMZN), Alphabet Inc (NASDAQ: AAPL), Dropbox Inc (NASDAQ: DBX), Uber Technologies Inc (NYSE: UBER), Spotify Technology Inc (NYSE: SPOT) and more.
Some such offerings include Alipay, Taobao, Tmall, Lazada, Weibo, and Alibaba Cloud.

The cloud business has been a key area for Alibaba, with revenues touching $2.49 billion in the June quarter and making up 8% of the company’s total. 

Even so, the cloud arm saw year-on-year growth begin to moderate after TikTok parent ByteDance stopped using the company’s overseas cloud service for its international business.

Comparatively, Amazon’s Web Services arm raked in revenues of $14.81 billion, as per the company’s second-quarter numbers. Alphabet Inc’s cloud business garnered revenue of $4.63 billion. 

Microsoft’s Azure cloud revenues have risen 51% year-over-year.

Hammered And Sickled: China’s President Xi Jinping was said to be involved personally in a decision to halt Alibaba-backed Ant Group’s initial public offering in November last year.

The clampdown on the IPO came after Ma made a speech in October ahead of the fintech IPO, criticizing China’s regulators on their approach toward technological development. 

See Also: Why China Slashed Jack Ma’s Ant IPO Hopes, Experts Explain

Ant and Alibaba have since remained caught in the regulatory fire that has enveloped other tech giants such as Tencent as well. 

Recently, the Chinese Ministry of Industry and Information Technology ordered such companies to stop blocking each other’s links on their respective websites.

The Financial Times reported this month that China wants to break up Alipay, the payment app owned by Ant, and move the company’s loan business to a separate app.

The regulatory crackdown has caused sentiment around the company to weaken, with shares falling 33.49% on a year-to-date basis in Hong Kong and 32.86% in New York.

Ever since Ma’s speech, he has remained out of the public radar making a solitary appearance in January when he met 100 rural teachers through videoconferencing. Even at the time, no information was provided about his whereabouts.

See Also: Why Jack Ma’s Reappearance Isn’t Enough To Calm Alibaba Investors

A Possible Turnaround? Despite the company’s recent troubles, analysts have struck a positive note time and again. Of the fourteen analysts who provided ratings for Alibaba in the last quarter, 3 offered bullish commentary with three others stating somewhat bullish positions. Only 1 analyst was bearish, as per Benzinga data.

The average price target offered by the analysts was $271.29 with a high of $306 and a low of $192.

“We believe Alibaba is navigating the current regulatory environment well and is poised to grow in several business areas such as ride-hailing and food delivery, in which increased regulations can benefit the overall industry as some competition will be eliminated,” said Needham’s Vincent Yu.

See Also: Alibaba Analyst Says Regulatory Environment ‘Challenging,’ But Worst Is Over

“At this point, we do not believe there is material risk to Alibaba’s businesses based on recent regulatory actions,” said Aaron Kessler of Raymond James post the company’s results in August.

Amazon Of The East: Alibaba is often compared with Amazon, as both companies operate in similar fields such as e-commerce and cloud web services. 

Despite the increased regulatory scrutiny the company is facing, it is making strides for its future. Recently it invested $300 million in the Shenzen-based DeepRoute.ai, a self-driving solution provider.

DeepRoute expects to augment its robotaxi fleet to more than 150 by end of this year.

Alibaba has also agreed to contribute $15.5 billion over five years to President Xi’s ‘common prosperity” vision, as per reports. 

Alibaba’s contribution will go to a program aimed at reducing the income inequality in the country. 

The company has also had to cough up fines to the tune of $2.75 billion for abusing its dominant market position.

It is thus conceivable that Alibaba would be able to put behind its regulatory troubles going forward at some point and truly emerge as the Amazon of the East. 

Returns: Alibaba stock has given a return of 135.3% as of Friday’s close at $160.05 from the IPO price of $68. On a year-to-date basis, the stock is down 31.2%.

Read Next: Alibaba Fires Manager Accused Of Rape Amid Widening Concerns Over Women Safety At Company: Report

Photo: Courtesy of Paul Kagame via Flickr

© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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