More tech firms may seek Alibaba's IPO magic
With Alibaba (BABA) officially taking the title of the biggest initial public offering ever, other tech companies may be looking for that magic to rub off on them.
More than a dozen Internet companies are currently slated to sell shares in public offerings, deals that might receive refreshed interest from investors following the success of Alibaba's IPO, which initially raised $21.8 billion. But when demand for the stock spiked on Friday, underwriters reportedly exercised an option to sell even more shares and the total value of the IPO jumped to $25 billion. The stock price soared to $96.29 on Friday, its first day of trading, giving the company a whopping valuation of $236 billion.
While Alibaba's success might embolden other tech companies to tap the markets for capital, one near-term outcome could be the emergence of the Chinese e-commerce company as a major buyer of smaller American businesses. Bolstered by the capital raised through the IPO, Alibaba could seek to purchase U.S.-based technology firms as a way to buy talent and new products, notes CB Insights chief executive Anand Sanwal.
"In the way you have Facebook and Microsoft as top acquirers of companies, Alibaba, with this much cash and liquid value in its public stock, is likely to become more acquisitive," Sanwal said.
Alibaba has already earned a reputation as an investor, with the company spending more than $1.45 billion over the past 2 years to make 23 investments, CB Insights notes.
As for follow-on IPOs, there are 16 technology or Internet companies that have filed to raise money through initial stock sales, according to data compiled by Dealogic. They include some familiar names for U.S. investors, such as GoDaddy and LendingClub. On the list is one Chinese-based firm, Chukong Holdings, a mobile game and service provider that created the game Fishing Joy.
"If the IPO didn't go the way it did, it would have hurt the IPO market," Sanwal notes.
The massive IPO comes amid a booming year for public offerings, with The New York Times' DealBook noting that 2014 so far has seen 195 public offerings priced. Another 13 companies are expected to go public this week, including Citizens Financial Group, a spinoff of the Royal Bank of Scotland.
But investors will also be keeping an eye on what happens with Alibaba's stock as some of the hullabaloo fades. On its second day of trading, Monday, the shares slipped more than 4 percent.
If the stock performance fades, that could put a damper on investor appetite for buying into new IPOs. And there's the increasing worry about whether the market is witnessing another tech bubble, with venture funding reaching levels that hadn't been seen since the dot-com boom, according to data from CB Insights.