Posts Tagged ‘nyse’

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by @anarchyroll

The biggest Initial Public Offering (IPO) in the history of the New York Stock Exchange occurred recently.

Have you heard of Alibaba? Had you heard about Alibaba before last month? Have you already forgotten about Alibaba after it didn’t carry over to a fresh news cycle? When someone mentioned it to me last month, all I thought of was the Beastie Boys song.

What is Alibaba?

  • Google, Amazon, PayPal and eBay all rolled into one
  • A wholesale marketplace; Alibaba is the middleman the connects retailers/sellers directly to customers/buyers
  • Alibaba is the top dog in the largest e-commerce market in the world

How did Alibaba become the biggest IPO ever?

  • Capitalizing on the Chinese consumers’ desires to shop online, for cheap, with trustworthy retailers/merchants
  • 80% of China’s e-commerce is done through Alibaba
  • Domination of the world’s largest growing market paired with international expansion has Wall Street drooling

So China’s biggest internet cash cow has gone public on stock market. Yahoo is the biggest American company to directly benefit from Alibaba’s IPO success as the two are very  much in bed together, on the level, and in public NOT under the table. In fact, Yahoo has benefited so much from Alibaba’s success there is talk of them investing in and/or acquiring Snapchat.

What are potential problems with Alibaba?

  • It’s Chinese, the communist government/central bank could throw a monkey wrench into the mix at any time, and already has
  • The stock being bought isn’t actual stock in the company, but in their Cayman Islands shell corporation
  • Is Alibaba-Mania a product of a new Dot Com Bubble? The question is worth asking.

Should you go out and buy as much Alibaba stock as you can afford? Well, if you’re a good investor, you should always asked yourself; what would Warren Buffett do?

As with most IPOs, if you weren’t ahead of the curve or a fan of the band before they were cool, the ship has mostly sailed on this one. What I find personally noteworthy about Alibaba, is everyone I know who invests and is well off because of it, wants nothing to do with Alibaba. Why? They all say the same thing; the Chinese government. How much is the government involved with Alibaba? How much influence do they have? How much transparency is there and how much of that can actually be trusted?

When the Head of the FBI goes on 60 Minutes and openly talks about the Chinese military attempting to cyber attack the US economy, one should be very cautious about investing in the Cayman Islands shell company of a Chinese internet marketplace with direct ties to the Chinese government.

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Twitter went public this week, successfully, take that Facebook! Sure the second day saw a slide of 5.8% but that is barely a drop in the bucket after going up by 73% in its first day of trading.  The lesson is clear, have Patrick Stewart ring the bell during your company’s IPO offering , it’s good luck.

But in all seriousness, TWTR (it’s stock list name) has shown staying and growing power as a company during its first two days as a publicly traded company.  Their IPO isn’t as similar to Facebook as one might think. Facebook had more market value/capital, revenues, and profits than Twitter going into its IPO.  Twitter is still yet to make a profit, which was not the case with Facebook.  So why is its stock performing so well it its infancy?

“We believe that the majority of the world’s 2.4 billion Internet users have great potential to find something or someone on Twitter that they are interested in,” he said. “Because of its critical mass, it should enjoy a competitive advantage for the foreseeable future.” Michael Pachter of Wedbush Securities, an investment firm that set the price of Twitter’s stock at $37 per share.

When I saw that quote my eyes popped, because in much simpler language with a more direct tone, that is usually how I pitch Twitter to my friends.  Pick a subject, topic, taste, hobby, or basically any kind of noun and you can find almost an infinite amount of information about it on Twitter.  The example I usually use is music; every musician in every band of every genre of 6every level of popularity along with their record label, fan club, and industry magazines all have the professional and/or personal Twitter accounts.

Understanding the business model of a product that you believe in then buying at a low price and selling at a high price is the corner stone of Warren Buffet’s model of investing. So if you “get” Twitter and have money to invest, buy now. Twitter is not going anywhere, it is as relevant a product as there is in the world.

Twitter’s slice of the social media pie is that it allows you to be anonymous and doesn’t chain you to your immediate friends and family.  Twitter can be used as an ego centric, gossip creating, social status machine like Facebook.  Unlike Facebook however, Twitter can be a legit breaking news source like the Bin Laden killing. It can connect revolutionaries who want to topple a dictator like in Libya.  Twitter can provide actual news and actual information that can have wide reaching effects on the world, not just on one’s social circle.

And that slice of the social media pie is directly correctly to its stock market value, invest accordingly.