Alibaba and the fate of IPOs

The Chinese e-commerce platform Alibaba was by far the largest IPO in the history of United States-listed stocks raising $21.8 billion on debut.

However, it became the world’s biggest initial public offering after the bankers took a ‘Green Shoe’ route, meaning they were given an option to sell their shares owing to a high demand from investors, taking the value of the IPO to $25bn.

Contrary to the popular belief, Alibaba is quite popular in the GCC. The platform offers dedicated trading web pages for Saudi Arabia and the United Arab Emirates. Though the traffic from this region is less than 10 per cent of Alibaba’s global reach, the growth in the numbers of customers seeking Alibaba’s services is increasing every quarter.

According to figures from Alibaba, the number of active buyers stood at 202 million at the end of September 30, 2013, while as of June 30, 2014 Alibaba had 279 million active users. Not only this, the revenues of the e-commerce giant have also shot up. By September 30, 2013, revenues were $1.79 billion, while this year at June end Alibaba’s revenues stood at $2.57bn – an increase of 43 per cent in less than a year.

The company has a market capitalization of $219bn, which makes it bigger than other firms in the same segment such as eBay and Amazon. Alibaba joins the likes of Twitter and Facebook on the New York Stock Exchange – the companies having Internet as the primary DNA of the business model.

The company’s nomenclature, which took place in a US café when founder Jack Ma asked around if they know Alibaba, has strong Middle East connection. Most of those present in the café on that day identified with Alibaba as the protagonist from the Arabian folktale Alibaba and the Forty Thieves. As the legend goes, Antoine Galland who translated One Thousand and One Nights added Alibaba’s story to the collection in 18th century after hearing it from a story-teller in Aleppo, which is a city in modern day Syria.

Few days after the announcement of the Alibaba’s IPO, the news of the second-biggest IPO of the year came from Saudi Arabia.

The Kingdom’s stock market Tadawul was notified that National Commercial Bank plans to raise $6bn through an IPO, which is expected to take place between October 19 and November 02, 2014.

According to Bloomberg data, the sale will be the second-biggest of the year globally, trailing Chinese e-commerce business Alibaba’s $25bn in September and ahead of Japan Display’s $3.1bn March IPO. “It will also be the largest in the Middle East, surpassing the $5bn raised by Dubai’s DP World Ltd. in 2007,” says the data.

The performance of Saudi Arabia’s stock market has improved considerably after the announcement by the regulator that foreign investors will be allowed to invest in stocks listed on Tadawul from next year onwards.

A recent report from Saudi bourse says Tadawul All Share Index (TASI) closed at a level of 10,854.79 points, gained 2,889.88 points (36.28 per cent) in the first nine months of 2014 as against the same period in 2013.

Total equity market capitalization at the end of the first nine months of 2014 reached SAR2.21 trillion ($590.24bn), increased by 39.58 per cent over the end of the first nine months of the previous year, says the statement from the Tadawul, adding: “The total value of shares traded for the 9M 2014 reached SAR1.65trn ($441.58bn), an increase of 54.02 per cent over the same period of the previous year.”

The total number of transactions executed during the first nine months of 2014 reached 27.22 million compared to 23.76 million trades during the same period last year – an increase of 14.54 per cent, says the Saudi bourse.

The equity story in the UAE is not less exciting. The IPO of Emaar Malls Group on Dubai Financial Market raised close to $1.6bn. The EMG stock listing is one of the biggest IPOs in the region in recent history.

The stock market sentiment in the UAE is indeed positive. A Dubai-based retail start-up Marka was looking to raise $75 million, but its stock was oversubscribed 36 times and ended by raising $2.7bn in April this year, according to news reports.

The listing of firms such as Alibaba, GoPro, ReWalk Robotics, Marka, Emaar Malls Group and Saudi’s NCB indicate that equities are back with a bang.