Alibaba Group Holding (NYSE:BABA) Raises $21.8 Billion

Today, Alibaba Group Holding (NYSE:BABA) released its initial public offering yesterday, pricing its shares at $68 each, which was the higher end of the predicted range that analysts predicted. In total, the company raised about $21.8 billion, showing a strong investor appeal for the Chinese e-commerce giant.

At the price of $68 a share, this initial public offering is one of the biggest ever, and puts Alibaba $167.6 billion in market valuation. This valuation beats out corporate icons from the United States, such as Walt Disney Co (NYSE:DIS) and Boeing Co (NYSE:BA). Alibaba’s offering also shoots itself straight to the top among e-commerce rivals in the United States, such as Amazon (NASDAQ:AMZN) and eBay (NASDAQ:EBAY). The Chinese online retailer now has more financial leverage to expand into the United States and other markets around the world.

According to Scot Wingo, the chief executive officer of ChannelAdvisor, a provider of e-commerce software, Alibaba should be considered in the same class with players like Google and Facebook Inc (NASDAQ:FB), given their scale, profitability, and prospective growth.

According to an Ipsos poll, 88 percent of Americans had never even heard of the Chinese e-commerce company, which manages about 80 percent of online sales in the world’s second largest economy. Alibaba also does business with a couple of other entities in China, including an online marketplace for consumers, called Taobao, as well as a payment service called Alipay.

However, that did not take away the enthusiasm among a number of large institutions in the United States who place orders for a total of at least $1 billion worth of shares. One of these companies was Blackrock (NYSE:BLK).

According to investors that were familiar with the matter, around 335 to 40 business institutions placed orders for $1 billion worth of share or more a piece.

Investors who are excited to buy into the rapidly growth and evolving Internet sector in China have been trying to get shares of the company since the top executives from Alibaba began the road show last week.

According to Jerry Jordan, the manger of the $48 million account at Jordan Opportunity Fund (NADAQ:JORDX) stated that Alibaba’s initial public offering was one of the more impressive IPO presentations. It truly blew some investors away as to how successful the company really is.

Given the amont of money raised so far, Alibaba’s initial public offering is the third largest in history, trailing behind the Agricultural Bank of China’s $22.1 billion record listing in 2010 and the ICBC’s $22 billion amount in 2006.

However, if underwriters opt to sell more shares as expected, Alibaba’s IPO will very likely beat out both Chinese banks to become the biggest initial public offering ever. The company and other shareholders also gave underwriters a separate option to buy an additional 48 million shares in a 30 day period.

Many investors found it difficult to obtain the full amount of shares they were looking for.

The president of Maple Capital Management, John Boland, said that the had placed an order for about 5,000 shares of Alibaba for his high net worth institution and individual clients, and was told that they would likely not get the full order because the offer was oversubscribed.

The Chinese e-commerce company’s revenue increased by 46 percent in the quarter between April and June based on solid gains in the mobile business. Net income from its shareholders increased by nearly three times to $0.84 a share, or a total of $1.99 billion.

Mr. Ma will have a fortune that is worth around $14 billion, propelling him into the ranks of technology moguls such as Jeff Bezos and Bill Gates.

Additionally, investors in Alibaba like Softbank (TYO:9984) from Japan and Yahoo Inc (NASDAQ:YHOO) will gain impressive profits as well for partnering up with the e-commerce giant early on. Yahoo will be selling around $8 billion worth of shares in the initial public offering, meaning that it will be left with a 16.3 percent stake in Alibaba. Softbank will not be selling its shares in Alibaba for now, and will hold onto a 32 percent stake, making it the biggest single shareholder in the Chinese company.

However, even with the successful initial public offering, there are still concerns surrounding the opaque corporate management structure of the company as well as Mr. Ma’s external investments.

According to Bob Casey, a Democratic senator from Pennsylvania, there have been very few cases where a company has an initial public offering of this size, and very little is known about the firm. Mr. Casey continues to express his concern regarding to amount of transparency from Chinese firms listing in the stocks markets in the United States.

Alibaba is selling a total of 320 million shares, which is roughly the same as 13 percent of the company’s capital. Nearly 67 percent of those shares are currently sold by existing shareholders, including Mr. Ma, who will gain $867 million from the deal.