(Bloomberg) — The New York Stock Exchange notched another victory with Alibaba Group Holding Ltd., successfully getting its shares trading after the Chinese e-commerce companys $21.8 billion initial public offering.
At the Big Boards trading floor in downtown Manhattan, NYSE traders completed the auction at about 11:53 a.m. New York time, the last step before Alibaba could start trading like any other stock. The shares, sold by underwriters to investors last night for $68 apiece, surged 38 percent to $93.89 today.
NYSE reprised its success getting a major technology company trading after Twitter Inc.s debut in November. In so doing, the oldest U.S. exchange avoided the travails of Facebook Inc.s IPO in May 2012, which was marred by malfunctioning software at NYSEs main American competitor, Nasdaq OMX Group Inc. Alibaba didnt pick Nasdaq as its primary exchange in part because of Facebooks botched debut, according to two people with knowledge of the process.
The NYSE did a tremendous job getting this open, said Robert Pavlik, who helps oversee $4.5 billion as chief market strategist at Banyan Partners LLC in New York. It takes a little time and effort, but there doesnt seem to be anyone else but them that can handle this sort of thing seamlessly.
Alibabas bankers raised $21.8 billion from investors yesterday, already the largest by any company in the U.S. It could break the global record — currently held by Agricultural Bank of China Ltd.s $22 billion IPO in 2010 — if underwriters issue more shares.
To prepare for Alibaba, NYSE invited brokers to help stress test its technology to ensure it could handle the record- breaking offering. The trial runs took place in July and on Sept. 6.
With any IPO, the primary exchange holds an auction to kickstart the stock. At NYSE, the process is managed by human traders at the exchanges Manhattan headquarters. For Nasdaq, the other exchange that corporations can call home in the U.S., the auction is run by software.
NYSE pitches its human touch as a key competitive advantage to help ensure automated systems dont spiral out of control. Nasdaq says its computers have repeatedly proven themselves reliable in the years following Facebook.
Get It Right
The key is that we get it right, Tom Farley, president of NYSE Group Inc., said during a Bloomberg Television interview today. We have a distinct model where we have humans in addition to sophisticated technology, so that on the IPO day we can make rational decisions and we can make sure that entrepreneur gets a full and fair price when that stock first comes into existence.
NYSE is owned by Intercontinental Exchange Inc.
With Facebook, a Nasdaq software error caused a late start to trading and caused some investors to buy more shares than they intended. Nasdaq paid a $10 million penalty to the U.S. Securities and Exchange Commission for its role in mishandling Facebooks IPO.
Failing software has repeatedly snarled trading over the past few years in the $24 trillion U.S. stock market. One of the worst incidents took place in August 2013 when malfunctioning computers at Nasdaq halted trading in thousands of companies for three hours.
Exchange systems were likely to be put under stress today regardless of Alibaba. Once every quarter, the expiration of futures and options on indexes and individual stocks coincides on a single day — an event known as quadruple witching that tends to spur more trading. More than 9.3 billion U.S. shares traded today, making this the third-busiest session of 2014, according to data compiled by Bloomberg. Alibaba volume exceeded 271 million shares.