In the News: Alibaba IPO Sets Record
On September 18, 2014, the Chinese e-commerce company completed the largest initial public offering (IPO) in history, raising more than $21 billion by selling 320 million shares at $68 each.
Early investors in the e-commerce giant got 60 percent of those proceeds; the rest went directly into company coffers to finance continuing operations and potential acquisitions.
The public got the chance to buy Alibaba shares the next day when Alibaba (symbol BABA) started secondary trading on the New York Stock Exchange. Although the company earned only $1.25 in the prior year and pays no dividend, everyone, it seemed, wanted a piece of the company. On the first day of public trading, more than 271 million shares traded hands, and the share price soared to as high as $99.75 before closing at $93.89-a first-day gain of 38 percent.
Source: News reports, September 18-19, 2014.
At the closing price for the first day of Alibaba stock trades, what was:
Instructions: Enter your responses rounded to two decimal places.
(a) The P/E ratio?
(b) The rate of return?
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