Alibaba

He may have failed his university entrance exams, been turned-down for a job at his local Kentucky Fried Chicken branch and have the kind of face that only a mother could love. Jack Ma founder of Alibaba is now the richest man in China and has defied all the odds, including the stereotype Chinese business personality. It's a remarkable story of endurance and inspiration.

Ma's grandfather a local official under the Nationalist Party that Mao defeated, was persecuted as an enemy of the Communist revolution. Ma and his relatives all suffered at that time. Jack Ma, who's Chinese name is Ma Yun was born in 1964 and at just five feet tall one wanders whether young Ma may have even been undernourished during his growing years.

Nevertheless, despite the odds stacked against Jack Ma he set-up a company called, Alibaba, from a dinky apartment and has since grown the online business to stellar heights to give him a net worth of 21.9 billion USD,according to the Bloomberg Billionaires Index.

At school Ma was no great academic achiever, however, what he did have was a sharp ear for sounds, as a boy he was able to distinguish the sound of one cricket insect from another. He also had a passion to learn English. At age 12, Ma would get up in the early hours of the morning, say 5 a.m. to walk or bike it to Hangzhou's main hotel so he could practice his English with foreign tourists. He continued this routine for nine years, where he offered his services as a free tour guide, befriended many tourist and later visited a family in Australia.

Following this were various jobs, first as an English teacher, earning $15 a month, then as a translator. He recalls one disastrous time when he was providing a translation service for a Chinese company that was attempting to recover a debt in America. “The American who owed money pulled a gun on me,” said Ma.

Not knowing what to do next a friend showed Ma the internet and an idea began brewing.

With the help of more than a dozen friends who pooled their resources — just 60,000 USD — he founded Alibaba, a business-to-business online platform. The company now makes more profit than rivals Amazon.com and e-Bay combined.

Alibaba is entering the next chapter in its history, it is planning an IPO. Alibaba floatation price has been determined at 68 USD a share, the Chinese online company is on track to raise at least 21.8 billion USD. This price is comfortably above the company's expected range which was increased from an initial $60 to $66. So Wall St is valuing Alibaba more than the company's advisers. The IPO price of 68 USD would give Alibaba a valuation of 168 billion USD. That would make it amongst the worlds 40 biggest public companies, according to S&P Capital IQ. That is a staggering value for a company, which was started in a flat with 60,000 USD just 15 years ago. It would make Alibaba the largest e-commerce company in the world. Amazon has a market capitalisation of 150 billion USD.

Alibaba will start trading this Friday in New York on Wall St, under the ticker symbol BABA. It is guaranteed to be a world-wide spectacle for investors.

Analysts are mixed as to whether at the upper end floated price of 68 USD would leave anymore room for an upward movement. But that would probably depend on how volatile the markets are on the floatation day. Whether the positive outcome from the recent Scottish referendum might calm some political uncertainties and spur euphoria in the markets, time will tell.

Another element in the equation for investors to keep in mind is that some early investors are not tied into a so called “lock-up” clause, which typically prevents them from selling their investments as soon as the company floats. The amount of Alibaba stock not tied to lock-up clauses has been valued at around eight billion USD, according to media reports. So if we get these hefty investors deciding to hit the exit door on floatation, unless there's equal demand to soak up the surplus stock, Alibaba share price might disappoint investors on its first day of trading. Put another way, the stock price could tumble in the first day of trading and these early investors could then double their fortune by shorting the stock on the way down. That's a cynical view, but it does seem odd that the floatation has been valued on the upper end of 68 USD.

An army of banks hired by the e-commerce company are trying to convince fund managers that its shares are cheep given the company's potential growth and profits. The big question is whether US investors will buy shares in a Chinese company. While there has been a lot of optimism about the fate of Alibaba’s business model and its potential performance as a publicly-traded stock, that optimism didn’t translate into plans to buy into the company. According to a report in the Wall Street Journal, less than half, 43% of those surveyed said that they would buy shares in the company. This is surprising since 64% believe Alibaba to be a good long-term investment. Moreover, 88% of those surveyed believe that the stock will appreciate in the first month of trading.

Fund managers who have not yet invested in Chinese stocks appear to be the least likely to buy Alibaba. Only 38% of those fund managers said they would buy Alibaba’s stock compared to 60% of fund managers who have already purchased shares of Chinese companies.

What smells fishy is the 8 billion USD of early investors not tied in a lock-up clause. This is not the unusual arrangement and it is unlikely to inspire the market with confidence.