How Alibaba Became More Valuable Than Facebook

The Chinese e-commerce juggernaut Alibaba became one of the most valuable tech companies in the world in its first day as a publicly traded company.

How Alibaba Became More Valuable Than Facebook
Getty Images / Andrew Burton

Google, Apple, Microsoft, Facebook... Alibaba? If you haven't heard of it, you're not alone: 88% of Americans have never heard of the Chinese e-commerce giant. 

But investors on Wall Street are hearing plenty about it today, because in its first day on the market it's blown past expectations and become one of the most valuable tech companies in the world

“And the Chinese online retail giant Alibaba has made its debut on the New York Stock Exchange and is already more valuable than Amazon, Ebay, and Facebook."

The site got its start in 1999 as a portal for Chinese businesses to connect to foreign markets — but quickly grew into a service that is China's Amazon, Ebay, and Paypal all rolled into one. 

And as the Chinese economy exploded, so did Alibaba — in 2013 it facilitated 80% of China's e-commerce, 60% of all parcel deliveries, and $170 billion in total transactions — more than Amazon and Ebay combined. (Video Via CCTV

Investors on Friday rewarded that domination by pushing its stock price from an opening of $68 to $93 a share, giving it a total valuation of around $170 billion

It's the largest IPO in United States history by far — instantly making the company a little more valuable than Disney, a little less valuable than Coca-Cola, and about on par with the GDP of New Zealand. 

CNBC: "Here is another way to look at it: A company like Alibaba, a huge market capitalization, enormous growth and very high margins, it is a very rare occurrence among IPOs."

But perhaps the rarest thing about the company — and the reason it's so valuable — is its placement in the heart of China's burgeoning consumer class. 

For Wall Street, buying Alibaba means investing in that growth. And in a county where 650 million people still lack internet access, they think there's a lot of growing left to do. (Video via Financial Times)

Still, some analysts are doubting Alibaba's ability to cope with the scrutiny that comes with a public stock. 

For starters, in China it's technically illegal for foreigners to own stock in a Chinese company. 

THE WALL STREET JOURNAL: "For most investors, they’re trying to buy a company and in this case you’re really not buying a company. For starters you're not actually buying shares in Alibaba."

Alibaba gets around this with some legal gymnastics — legally, it exists in the Cayman Islands — but it means investors will have no protection in court if Alibaba wants its shares back. 

Basically, investing in China is still a risk — a risk that MarketWatch blames on inadequate financial auditing and a government whose next move is always a mystery. 

But for now, it seems Wall Street is more than willing to take that chance — which means many more Americans could be hearing about Alibaba very soon.   

This video includes images from Getty Images.