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How to trade Alibaba's IPO

As soon as the Alibaba IPO in Hong Kong happens, Alibaba stocks will become available for trading with Capital.com. You can trade Alibaba shares through contracts for difference (CFDs) and speculate on Alibaba’s value without the need to own the underlying shares.

In today's unstable economic environment, it may sometimes be hard to feel confident about making some investment decisions. This is why investing in CFDs can be a great idea, providing you with easier execution and greater liquidity. By choosing CFDs, you can profit from ANY price movement in Alibaba’s stock: you can either take a long position, speculating that the price will rise, or a short position, speculating that the price will fall.

Another advantage of trading the Alibaba IPO with CFDs is leverage. Trading with leverage allows you to open and control significantly larger positions in a trade by depositing a small initial amount of capital. However, bear in mind while leverage provides the opportunity for big profits, it can also result in bigger losses.

Alibaba IPO date: When will Alibaba go public on the HKEX?

Almost five years after Alibaba hit all the records with a $25 billion IPO on the NYSE, in mid-June 2019, reports published that the company has filed an official application for an IPO with the Hong Kong Stock Exchange. The anonymous sources claimed that the filing was made confidentially.

Speaking in regards to the underwriters, the reports named China International Capital and Credit Suisse to lead a planned Hong Kong share sale.

Alibaba’s Hong Kong IPO was expected to take place during the third quarter, sometime around late August. However, when the company released its better-than-expected earnings in August, not a word was mentioned on the Hong Kong listing.

It was then speculated that the Chinese online retailer had been working toward a September listing. Two sources close to the matter said Alibaba was considering several timetables and briefed on the company's discussions describing the deal as “fluid.”

Amid the recent political instability in Hong Kong, the company decided to rethink its plans. The listing was always expected to be a complex matter due to China’s tight control of cross-border share trading. Hong Kong’s unrest has only added fuel to the fire, taking the complexity to a whole other level.

So, will the world witness Alibaba IPO in Hong Kong in 2019? While Alibaba postpones its listing on the Hong Kong Stock Exchange and no new timetable is formally set, it is believed that once political tensions in the region loosen up and market conditions improve, Alibaba could reportedly pursue a deal in 2019. Some believe it may happen as early as October, while others make their bets on 2020.

What is Alibaba’s IPO valuation?

Alibaba is currently one of the world’s most valuable companies, with a market value of over $435 billion and a very decent price-to-earnings ratio of almost 34.

In 2014, Alibaba raised a record-breaking $25 billion in New York in the world’s largest initial public offering.

Today, the business is expecting to raise another $20 billion via its secondary listing in Hong Kong. Truth be told, while some estimated the deal to live up to that figure, according to sources close to the matter, the company is set to raise between $10-$15 billion. 

If the company, which had around $30 billion of cash as of March 2019, successfully completes its IPO in 2019, it could overshadow Uber's $8.1 billion listing as the largest of the year. 

Why is Alibaba going public?

Typically, the majority of companies go public with the aim of raising capital that is needed to fund further development and expansion. However, Alibaba doesn’t really seem to be the case.

For the past few years, the company has been in a rather sound financial situation, showing unprecedented strength and growth in its annual reports. In the fiscal year of 2018, Alibaba Group’s revenue reached $39.3 billion, marking the highest year-on-year growth rate of 58% since its IPO in 2014. 

In the fiscal Q1 ended June 30, 2019, the company’s revenue was $16.741 billion, a year-on-year increase of 42%.

Here is what Alibaba’s annual revenue from 2010 to 2019 looks like:

Annual revenue of Alibaba from 2010 to 2019  (in million yuan)

So, why is the company willing to go public in Hong Kong? It was earlier stated that Alibaba doesn't view this IPO as a pivotal step for its business, but rather as a way to “diversify funding channels and boost liquidity.”

Reacting to the latest Alibaba IPO news, David Dai, a Hong Kong-based analyst at Bernstein, said: “Another part of it [IPO] is potentially better valuation in the Hong Kong market.”

Moreover, by carrying out the Alibaba IPO, China attempts to protect the company from rising tensions between Washington and Beijing, and increasing uncertainty in the trade war aftermath.

The Hong Kong listing will also let pensions and other investors from mainland China to buy shares of the company. Even though Alibaba is already listed on the NYSE, the Chinese government does not allow its citizens to buy shares of companies listed on a US exchange.

Today, the Hong Kong Stock Exchange is becoming a popular destination for IPOs, bringing Chinese major tech businesses closer to their home investors. This listing has been a point of interest for investors looking to assess the business environment in Hong Kong.

What is Alibaba?

Established in 1999, Alibaba Group Holding Limited is a Chinese multinational conglomerate holding business, with operations in over 200 countries. It specialises in retail, e-commerce, technology and internet.

What was once a startup employing only 18 people now has over 100,000 employees. Today, Alibaba owns and operates a diverse range of businesses across the globe in numerous sectors, including cloud computing, artificial intelligence research and payments technologies in addition to its flagship online retails. The business was named one of the world's most admired companies by Fortune and had the 9th highest global brand value in 2018.

The company hosts the largest consumer-to-consumer (Taobao), business-to-consumer (Tmall) and business-to-business (Alibaba.com) marketplaces in the world, having hundreds of millions of users and hosting millions of businesses and merchants.

According to Financial Times Global 500, Alibaba is one of the top 10 most valuable companies in the world. In January 2018, it became the second Asian company to break the $500 billion valuation mark.

How much is Alibaba worth? Represented by the company’s market capitalisation, Alibaba’s net worth was $435.395 billion as of September 30, 2019.

Here is the historical data on Alibaba market cap:

Alibaba market capitalisation since its IPO in 2014

Why is Alibaba going public?

Dominating China's e-commerce market, Alibaba is the holding company of a multitude of world-renowned businesses, including Taobao, Tmall, Alipay, AliExpress, AliCloud, AliTrip, AliPictures, AliMama, 1688, Ant Financial and Cainiao Network. All these subsidiaries are well-integrated, making the Alibaba Group one large ecosystem.

The company derives revenue from its four business segments: Cloud Computing, Core Commerce, Digital Media and Entertainment, and Innovation Initiatives and Others. Although the company operates through a unique combination of business models, Alibaba's core business – commerce – accounts for around 85% of total revenue.

The company acts as a middleman between sellers and buyers online, facilitating the sale of goods through its extensive network of websites.

Who owns Alibaba?

No one person or institution owns Alibaba in its entirety. However, the company’s co-founder and now-former executive chair, Jack Ma, is the single largest individual shareowner, with over 303.7 million shares, equating to 11.7% of shares outstanding.

Joseph Tsai, Alibaba co-founder and vice-chairman, is the second-largest shareholder in the company, with 215.8 million shares, representing 8.4% of the outstanding stock.

All in all, Alibaba Group has raised a total of $8.9 billion in funding over 17 rounds. Their latest funding was raised on June 2, 2016, from a Post-IPO Equity round.

What is an IPO?

An initial public offering is the process by which a company lists its shares for public trading. The company decides how many shares it is going to offer, and an investment bank typically estimates the initial price of the stocks based on supply and demand. After the company’s shares are listed on the stock exchange under a particular ticker symbol, these shares can be publicly traded.