Editor’s note: This article was first published in March 2014, when Alibaba had just confirmed its plan to list in the US; the $15 billion target and $130 billion valuation were estimates of the time. It listed on the NYSE in September 2014, raising about $25 billion including the over-allotment.
It’s official. Chinese internet giant Alibaba is going to list its shares in the United States. And it promises to be a big event: it is expected to aim to raise $15 billion, which would make it the second-largest IPO in history, surpassed only by Facebook, which sought $16 billion.
Alibaba is a mix of eBay and Amazon (it also bills more than those two companies combined), but with the advantage that it already has the Chinese market, which is very hard for foreign companies to crack. In fact, Twitter and Facebook are censored in China.
If Alibaba raises the $15 billion, the company would be valued at more than $130 billion. Plenty of companies already have valuations this high, and it is inevitable that the words tech bubble are coming up more and more often.
After the dot-com bubble burst in 2000 and the financial crisis of 2008, the IPO market was practically at a standstill, but in 2012 it began to pick up again, and more than 220 companies have reached valuations above $55 billion. Meanwhile, inexplicably, investors’ appetite for these new tech companies, with valuations that are probably illogical and high-risk, suggests that something is going to “burst” somewhere. Even so, although we can foresee what is going to happen, nobody knows when it will happen.
Euro Pacific Capital says that the Fed has managed to create a bubble bigger than the one in the 1990s, and more dangerous than the housing bubble that burst in 2008. Peter Schiff is sounding the alarm about what would happen if the two bubbles we are cooking up were to burst at the same time. That would be the biggest economic disaster ever seen.
Of course, Peter Schiff forgets a third bubble, the one we call the mother of all bubbles, also known as “the ultimate bubble”: none other than the financial derivatives bubble.
Further reading
- Analysing companies from the outside in: which companies to invest in
- Which markets to invest in in 2014
Featured image: Danielinblue, CC BY-SA 4.0, via Wikimedia Commons.
