For those with a finger on the pulse of the financial world, you will more than likely have heard the term Alibaba IPO floating around recently. It’s being touted as one of the most interesting and exciting trading opportunities for quite some time and with that in mind, here are a few basics to get you clued in if you too are hoping to get involved.
What is ‘Alibaba IPO’?
Alibaba is an online Chinese company that operates as a marketplace for retailers, wholesalers and small businesses via the handling of e-payments and monetary transactions. IPO simply stands for Initial Public Offering, and refers to the first time a company makes stock available for general purchase.
Why the hype?
It’s expected that Alibaba could break the record for the biggest IPO of all time, since the online giant accounts for an impressive 80% of web-based sales (more than both Amazon and eBay combined). With initial filings suggesting each share could be priced at between $66 and $68 (hinting at high demand), the 368 million of them going on sale are expected to create quite a buzz.
Is it worth investing?
Alibaba has, unlike many before it, shown clear earning potential for investors. In the last fiscal year, they nearly tripled their profits to $3.75 billion, and increased revenue by 50%. Since China’s internet penetration is not as high as it is in some other countries, there’s still plenty of room for growth as well, which is why so many people are eager to get a slice of the action.
Are there any risks?
The value of a company by the end of its first day trading on the markets is dependent on a huge variety of factors which are often unpredictable. The start of trading in Facebook was delayed on the day, for example, by technical problems on the exchange that did much to dampen enthusiasm for the shares. Figures for Alibaba have been strong however and their robust business model has given many people confidence in their ability to live up to expectations.
How do you get involved?
Services like IG, a leading CFD and financial spreadbetting provider offer a grey market on upcoming IPOs, where customers can trade before shares are actually released based on the anticipated value. This allows you to spread bet and take advantage of any sudden shifts or instability within the market. Trading for Alibaba has been available since March and quickly settled to be able to operate somewhat steadily at between $195-205 billion. All in all the performance of this grey market has suggested that in this case, the hype may in fact be justified.