Boom: Alibaba surges in huge IPO debut

NEW YORK (CNNMoney)

Alibaba, the biggest IPO to ever hit Wall Street, made a huge splash in its debut on Friday.

Shares of the Chinese e-commerce giant opened at $92.70. That marks a 36% pop from the $68 price of its record-shattering initial public offering. The first day of trading can be very volatile. Alibaba continued to climb and nearly hit $100 before sinking back down to around $93.

The early bounce signals optimism among investors about Alibaba's (BABA) ability to continue its rapid growth trajectory as China's middle class grows and buys more and the company possibly expands to other parts of the world.

Unlike the disastrous 2012 Facebook (FB, Tech30) IPO on Nasdaq, Alibaba's first few minutes as a public company went smoothly. That's good news for the New York Stock Exchange, where Alibaba chose to list its high-profile IPO under the ticker symbol "BABA."

Alibaba raised $21.8 billion late Thursday by pricing its IPO at $68 per share. That's the largest ever IPO for a company listed on an American exchange.

Goldman Sachs (GS) and the other investment banks that made the IPO happen have the option to purchase additional shares. If those options are exercised as expected, the Alibaba deal would raise $25 billion -- a world record.

Alibaba is cashing in on a very bullish overall atmosphere for stocks. The S&P 500 touched a new all-time high on Friday.

Don't worry. If you've never heard of Alibaba, you haven't been living under a rock.

The Chinese company, which was founded in 1999 by former English teacher Jack Ma, has yet to make its presence felt in the U.S. But the truckload of new cash raised by the mega IPO should change that.

Asked how he felt about the company he founded going public, Ma told CNNMoney: "It's an honor, it's an honor."

Ma told CNBC that years from now he wants Alibaba to be compared with American icons like Wal-Mart (WMT), Microsoft (MSFT, Tech30) and IBM (IBM, Tech30). People will say Alibaba "changed the world," he said.

Alibaba has largely focused on the exploding Chinese Internet market, which has already made the company a dominant player in e-commerce.

Roughly $248 billion of merchandise exchanged hands on Alibaba's platforms in 2013, according to IDC. That trumps the gross merchandise volume of Amazon.com (AMZN, Tech30), eBay (EBAY, Tech30), JD.com (JD) and Japan's Rakuten (RKUNF) -- combined.

Thanks to those impressive figures, Alibaba starts life with some elite company you've definitely heard of. At the $68 IPO price, Alibaba was valued at $168 billion. That's more than 20-year-old Amazon.com .

But the early pop gives it an even more impressive valuation of $228.5 billion, which is about $30 billion more than Facebook. It's also less than halfway to Google (GOOGL, Tech30) status.
alibaba market value 3

The Alibaba IPO price also put a lofty valuation on the company. Based on its earnings for the year ended March 31, the deal values Alibaba at a lofty price-to-earnings multiple of 44. That metric will climb to even more expensive levels as Alibaba climbs above $68.

Analysts at Cantor Fitzgerald launched coverage of Alibaba on Friday with a "buy" rating, although the stock is already approaching the firm's $90 price target.

"We believe that a differentiated pricing model, strong brand and unmatched scale give Alibaba an unfair competitive advantage," Cantor analyst Youssef Squali wrote in a note.

Yahoo (YHOO, Tech30) investors are also cheering because the U.S. Internet company is cashing in a chunk of its investment in Alibaba. After taxes, Yahoo is poised to make around $5.1 billion by selling about 122 million Alibaba shares. Yahoo is holding onto a major stake that translates to billions more in value. 

Culled from www.cnn.com