Gone Baby Gone: Alibaba.com is a Public Company No Longer

Alibaba.com's run as a public company ended today, in stark contrast to the frenzied fanfare that marked its debut. When the Hangzhou, China-based e-commerce company raised $1.7 billion on the Hong Kong Stock Exchange on Nov. 6, 2007, it was the largest Internet IPO since Google. On the first day of trading, shares rose more than 192 percent to close at HK$39.50, and volume was so heavy the stock exchange's trading system was temporarily overwhelmed.

The last day of trading, on the other hand, was covered by few media outlets. Alibaba officials made no public statements to mark the privatization, in which parent Alibaba Group is paying $2.45 billion to vacuum up the 27 percent of Alibaba.com held by the public.

The silence surrounding today's delisting of the shares underscores the role that oft-unrealistic public expectations and hype continues to play in driving the share price of Internet companies (As if the recent Facebook IPO wasn't evidence enough). While it did not grow at Google-like rates, Alibaba.com's financial performance was solid after the IPO.  Between 2008 and 2011, revenue more than doubled from RMB $3 billion to RMB $6.4 billion, profit attributable to shareholders grew from RMB $1.2 billion to RMB $1.7 billion, and the website's paying members jumped from 432,000 to more than 765,000.

Yet those numbers are not what investors had come to expect from high-flying Internet companies, and the excitement of the IPO for Alibaba.com—which after all is a not-so-sexy website that connects suppliers and buyers around the world—faded quickly. So did the share price, which went precisely nowhere during the company's time in the public eye. The stock debuted in Hong Kong at $13.50 a share. Alibaba Group paid $13.50 a share to privatize Alibaba.com this week.

Alibaba Group's argument for privatization included expectations that the website, which depends heavily on subscription fees from Chinese exporters, will see slowing membership growth as the company dials back aggressive efforts to recruit customers and instead emphasizes a higher-quality user experience and the rollout of new value-added services—changes that would likely depress financial performance and Alibaba.com's stock price in the short- to medium-term. Few investors complained that the $13.50-per-share offer was too low, especially given the current unsettled state of the global economy and stock markets.

In an e-mail sent to employees when the privatization plan was announced in February, Alibaba Group founder and chairman Jack Ma was upbeat about Alibaba.com's post-privatization future as a company that could be more tightly integrated with sister sites like Tmall and Taobao Marketplace, consumer-focused e-commerce sites that dominate the China market.

"Just as the IPO was a starting point for Alibaba.com and not the finish line, privatization is not the end but rather a new beginning," Ma wrote.