Alibaba.com soars on magic carpet

IPOpen sesame

Faith in the promised Chinese internet boom went fanatical today, with speculators sending new shares in ecommerce portal Alibaba.com rocketing almost 200 per cent in its first day of trading.

The stock on offer opened in Hong Kong at $1.74, and closed at $5.15, having debuted 257 times oversubscribed.

That makes for a market cap of $25.7bn*, or about 155 times next year's estimated profits. By comparison, Wall Street wonderboy Google trades at 35 times its earnings.

Alibaba flogged off shares in its business trading tentacle, Alibaba International, raising $1.5bn. It marks the biggest internet IPO since Google raked $1.9bn in 2004. The Chinese firm took this as good enough reason to slap its own back in full-page Financial Times ads today.

Alibaba International offers Chinese businesses a cheap way to find each other and trade online. Its parent company Alibaba Group also runs Taobao.com, an eBay-style site pitched at Chinese consumers, which was not part of today's public offering.

The B2B site accounted for 43 per cent of Chinese ecommerce transactions in the three months ended 30 June, though many pay no charge to Alibaba for the service. Premium subscribers purchase preferential access to buyers.

The group was founded in 1999 by former English teacher Jack Ma, who said ahead of the sale that Alibaba aims to become the "leading e-commerce platform for China, Asia, and even the world".

"The performance of the shares today show our pricing was reasonable," he added after bagging the bucks. Some analysts had said even the initial price of $1.74 was a bit rich. They're expecting a correction when speculators who deliberately drive prices skywards soon cash out.

Yahoo! owns 39 per cent of Alibaba Group, which it got in return for ownership of Yahoo! China and $1bn in 2005. ®

*Small potatoes. Yesterday's flotation of Far East oil giant PetroChina created the world's first trillion-dollar company.

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