Question

Stock Market Valuation and Success - IPO

An initial public offering (IPO) is the very first sale of stock that is issued by a company to the public (Hayes, n.d.). Until a company's stock is offered for sale to the public, they are unable to invest in it. A reason for a company to go public is to raise a large amount of money for the company in order to grow and expand. The IPO options raises the largest sums of money for the company and its early investors (Hayes, n.d.). The largest US-listed IPO was claimed by Alibaba Group in 2014, making it the biggest in the world (Mac, 2014).

Alibaba Group is a diversified online ecommerce company based in China. The company priced its shares at $68 which initially raised $21.8 billion (De La Merced, 2014). On the New York Stock Exchange, the company began trading at an opening price of $92.70, a 36% jump from the IPO price. Alibaba was able to sell 15% more shares than originally planned by exercising a "green shoe" option and buying additional 48 million shares from the company to cover stock they sold to meet high investor demand. By doing this, it took its value of the deal to $25 billion (Pisani, 2014).

The Alibaba IPO was a huge success and continues to bring in significant investors. The company's revenue nearly doubled in a year and at the same time, its EBITDA margin increased from 48% to 53% (Trefis Team, 2015). Additionally, in their first quarter, the company's stock rose 10% which was more than expected in regards to growth. Since Alibaba is the leading player in the Chinese e-commerce market, around 80% market share, it is expected to heavily leverage the growing demand within this market.

For Chegg: explain whether you agree or disagree with the above assessments of my Selected IPO that occurred in the last five years IPOs. Can you identify additional economic and market factors that may have influenced the results of the IPO?

Answer 1

Yes totally Agree.

The economic and market factors tat have influenced the results of the IPO were as below:-

• Growing demand for Chinese products in international market
• No stiff competition from other small scale companies engaging in the same business
• Ability to offer free shipping to many countries even for single order placed
• Refund of money guarantee clause in case products are not delivered
• Tapping on Indian market with huge customer base-including re sellers