News broke on Friday that the underwriters of Alibaba (BABA) stock were preparing to close their books early, as strong demand for the Alibaba IPO will likely allow them to sell all the allocated shares of the Chinese e-commerce giant earlier than expected. BABA was already expected to be the biggest IPO in U.S. history, raising $21.1 billion in total, but the excess of demand could potentially cause BABA to raise its IPO price from the $60-$66 level, or at least price at the high end of the range.
With such a hot issue, individual investors might be curious to know the Day 1 price performance of the U.S.’s five biggest IPOs of all-time in order to gauge whether BABA stock is a buy or a sell.
Without further ado, here are the five biggest IPOs in American history and their corresponding Day 1 price performance, ranked in descending order by the amount of money each deal raised:
No. 1 Biggest IPO: Visa (V) ($17.9 billion)
Day 1 performance: +28%
Year: 2008
Investors jumped at the chance to buy shares of V stock when it debuted, with shares closing at $56.50, a far cry from its $44 IPO price. The credit card company decided to go public in the midst of a terrible recession, which is probably the reason for its conservative pricing. In fact, for investors, the Visa IPO was an absolute steal. Since then, V stock only traded below its $44 IPO price for a one-week period in 2009, and long-term investors have fared pretty darn well: Today V stock trades for more than $210 a share.
Be forewarned, however: The BABA IPO price doesn’t look to be priced quite as conservatively as Visa’s.
On to the next biggest IPO in U.S. history.
No. 2 Biggest IPO: Enel SpA ($16.5 billion)
Day 1 performance: -0.09%
Year: 1999
Enel SpA, which at the time was the largest publicly held electric utilities company in the world, debuted on Wall Street near the peak of the dot-com boom. If only it had slapped a “.com” on its IPO it might have performed better, but alas, the Italian giant lacked that foresight.
(As further testament to the times, Enel SpA’s closing price that day was $45 3/16.)
The stock no longer trades on U.S. exchanges. Our next largest certainly does, though. If you’re reading this, you probably remember it fairly distinctly, as a matter of fact.
No. 3 Biggest IPO: Facebook (FB) ($16 billion)
Day 1 performance: +0.6%
Year: 2012
The Facebook IPO was plainly and simply an abject nightmare, despite what its barely positive Day 1 performance may suggest. It was hyped up beyond belief — far more than the BABA IPO — and investors openly speculated about what type of yachts they were going to buy when FB stock made them all fast millionaires.
A month later, the stock was down 21% from its $38-per-share price. Nasdaq also had issues processing orders on the first day to boot.
Long-term investors, however, have been rewarded pretty well. FB stock has more than doubled from its $38 IPO price.
No. 4 Biggest IPO: General Motors (GM) ($15.8 billion)
Day 1 performance: +3.6%
Year: 2010
Shortly after the auto industry was bailed out by the U.S. government, GM went public (again) in 2010, raising nearly $16 billion to help aid its recovery and in turn make taxpayers whole.
As far as performance (short-term or long-term) is concerned, investors didn’t miss out on anything special. In fact, investors would have been much better buying index funds instead of GM stock: Shares still trade in the range of its $33 IPO price today.
Next up — the fifth-biggest U.S. IPO of all-time (before BABA, of course).
No. 5 Biggest IPO: Deutsche Telekom ($13 billion)
Day 1 performance: +13.8%
Year: 1996
The oldest IPO on our list occurred nearly 20 years ago, so adjusted for inflation the Deutsche Telekom IPO of 1996 was a mammoth deal. It was a global offering, with the German phone company going public both in Europe and the U.S. The company went public at $18.89 per share, the strange price being due to the original offering being due to currency conversion. Deutsche Telekom shares no longer trade on major U.S. exchanges.
As of this writing, John Divine did not hold a position in any of the aforementioned securities.
