SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: New kid in town. And
traders could not get enough of him. Jack Ma brings his Alibaba to a
mobbed market. It`s a smashing debut for the biggest initial stock
offering ever. But should you buy the shares now?
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Get in line. People
across the country waited for hours, even days with a single goal, to buy
the new iPhone. Today, they could and did.
GHARIB: And, power sharing. Can two people both with the title co-
CEO successfully run a company together? The answer might surprise you.
We have all that and more tonight on NIGHTLY BUSINESS REPORT for
Friday, September 19th.
MATHISEN: Good evening, everyone. And welcome.
On a day that saw the Dow rise to a new all-time closing high, there
seemed to be only one stock that everyone on Wall Street was talking about
today. Its name, Alibaba, and its triumphant initial public stock offering
managed to live up to all the hype, creating a seldom seen mob of traders
jockeying around the post where shares finally began trading on the New
York Stock Exchange just before noon. Alibaba`s IPO was one for the record
books, bigger than any offering that came before it.
Shares of the online shopping powerhouse blew right past the opening
share price set Thursday night, and end it up, putting a value on the
company of roughly $240 billion. That`s more than another tech giant and
top U.S. competitor, Amazon (NASDAQ:AMZN). It`s more than eBay
(NASDAQ:EBAY), more even than Facebook (NASDAQ:FB), and just a smidge below
By the closing bell, Alibaba`s shares were 38 percent higher. They
rocketed to nearly $94 a piece.
Kayla Tausche walks us through the company`s blowout debut on the
KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Alibaba is off and running. The Chinese ecommerce giant soaring above $90
in its debut after pricing Thursday at $68 a share.
The company founded in the apartment of entrepreneur Jack Ma in 1999
with just a dozen partners now responsible for 80 percent of China`s
ecommerce and valued today in the public market in the United States at
Alibaba`s business model is often described as a matchup between
Amazon (NASDAQ:AMZN) and eBay (NASDAQ:EBAY), but it`s now is a formidable
challenge to tech companies here in the U.S. It`s bigger than Disney
(NYSE:DIS), IBM and JPMorgan (NYSE:JPM) Chase.
But Ma said he draws inspiration from another U.S. corporation.
JACK MA, ALIBABA FOUNDER: We hope in the next 50 years, the world
changes because of that. We want to be bigger than Walmart. We want to be
bigger — it`s not just the size, we want to learn from Walmart. It
changed the business in the last century, (INAUDIBLE).
And we hope, 15 years later, they say, this is a company like
Microsoft (NASDAQ:MSFT), like IBM, like Walmart. They changed and shaped
TAUSCHE: Alibaba`s platform sold $259 billion in goods last year and
its vendors were responsible for 60 percent of all packages shipped in
China. Alibaba helped small businesses connect to new customers and in
turn buttressing China`s middle class.
(voice-over): That`s the main reason why investors have been clamoring
for shares. They`re willing to pay much more than the $68 IPO price set by
the company. But Ma said he did not want to disappoint shareholders and he
wanted them to make money. He also wanted to avoid the disastrous IPO of
Facebook (NASDAQ:FB). The New York Stock Exchange instead taking two hours
after the open to carefully match buyers and sellers, debuting BABA in an
open described as textbook and seamless, at $92.70 a share. And formally
minting Hangzhou`s Jack Ma as the richest man in mainland China.
But his fight to grow Alibaba is still centered on the little guy,
when he`s often reminded of by a famous movie character.
MA: The hero I had was Forrest Gump. And I watched the movie before
I came here again, before coming to New York, because I watched the movie
again, telling me that no matter, you are you, no matter what changes. And
I`m still the guy 15 years ago.
TAUSCHE: Alibaba, of course, is now far bigger.
For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in New York.
GHARIB: Well, Yahoo (NASDAQ:YHOO) investors were not as enthusiastic
today. Yahoo (NASDAQ:YHOO) owns nearly a quarter of Alibaba but it sold
121 million shares after the initial offering price of $68 a share, not at
the opening price which soared to almost $93. So, no surprise shares of
Yahoo (NASDAQ:YHOO) ended down nearly 3 percent on the day but Yahoo
(NASDAQ:YHOO) could collect about $5 billion in profits.
MATHISEN: So, should you own shares of Alibaba in your portfolio?
Let`s find out from Max Wolff. He`s a partner at Manhattan Venture
Partners, an investment and research firm in New York City.
Welcome back, Max, good to have you.
What do you say? Should I buy this stock if I can get some on Monday,
Tuesday, or Wednesday of next week?
MAX WOLFF, MANHATTAN VENTURE PARTNERS PARTNER: Thanks for having me.
It`s always a pleasure to join you.
It depends on what your time horizons are, but that is a bit
disappointing to answer a question with a question. So, what I`d say is at
$93-plus where it sets right now, you really don`t have much upside here.
So, we think that the $93, this company is basically fully priced to have a
fantastic year ahead. And that means that you`re going to take a lot more
risks than you`re likely to get upside reward over the next 12 months.
We love the company. We think it`s going to do big things. But the
price said they already did that and we have to wait and see.
GHARIB: So, some investors may say, Max, it had so much momentum
today, it may hit $100 next week or next month or so, and they don`t want
to miss out on that run. What would you say to them?
WOLFF: I`d say they very well could be right. There`s something
called the FOMO factor, what we call the FOMO factor in this business,
“fear of missing out”.
I would say the following, you have to be at least as frightened
getting involved in something that cost you money as you are about missing
out, right? In other words, there`s huge returns at the casino, but you
don`t go there and put the deed to your house on the roulette wheel, even
though you know by not doing that, you`ll never get 36-1. What you`re
really hoping to make sure you don`t do is lose your house.
MATHISEN: So, Max, what I`m hearing you say is no, for most
investors, it is not a good buy at the price. It`s selling at something
like 20 times sales if the numbers on sales can be believed.
But — so there is no fundamental issue that you have with the company
itself or with the corporate structure under which investors are actually
buying shares in a holding company domiciled in the Cayman Islands. That`s
not what worries you here.
WOLFF: It`s a great question. I do like the company, I do think it
has a bright future I think for the reasons you pointed out. You can`t
actually buy shares in Alibaba. So, buying shares in Alibaba is a bit of a
What you have to do is buy shares in something called a variable
interest entity. And what that means is that under Chinese law, a
foreigner, like the people buying on the New York Stock Exchange can`t buy
So, a company that`s set up in the Cayman Islands or in the Caribbean,
off the U.S. here, you buy shares in that company which has an underlying
contractual relationship with the company Alibaba. I do think that`s
probably OK. We`ve seen it done about 100 times, only two of those 100
times have blown up.
But I do think because there is an extra murkiness and extra risk and
extra complication that makes me more sensitive to at least want a bit of a
discount or at least not want to pay a large premium.
GHARIB: Let me ask you this, Max, because I saw your big report on
Alibaba, you`ve researched a lot on it. And for investors looking for some
of the fundamentals, do you think that this company has the capacity to
really keep up this growth rate and to be, and to compete against a Walmart
or an Amazon (NASDAQ:AMZN), or IBM even?
WOLFF: So, it`s a great question, and we are going to give our report
for free at mvp.vc, so folks who want it could get a report for themselves,
may be a cure for insomnia that you had expected, but it does have a lot of
I do think this company it will grow into a competitor of sorts.
However, unlike some folks, I think the way the average American will deal
with the company is through companies here that they have been buying.
Companies like Lyft, which provides cab or limited type transportation.
Kabam, whose online games are played by people.
I think eventually, we`re going to see them have a bigger role in the
future here, in the business to business front, where local retail sales
and merchants will buy in bulk from all over the world, in a nice easy way
and have those products produced elsewhere brought here and sold.
MATHISEN: Max, thank you so much. Great to be with you, again.
WOLFF: Thank you.
MATHISEN: Max Wolff of Manhattan Venture Partners.
GHARIB: As we continue our coverage on Alibaba, Alibaba founder Jack
Ma said that the company`s growth will be a win for small businesses here
in the U.S. so how will those businesses see the gains and if they`re the
winners, who loses?
Kate Rogers (NYSE:ROG) takes a look.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): For
some companies, selling products on Alibaba has not been as easy as
Wil Willis listed the shirts he designed and manufactured for his
company Confrontational Clothing, on the site last year. He went to
Alibaba to get international exposure. What he got instead was an inbox
full of spam.
WIL WILLIS, CONFRONTATIONAL CLOTHING OWNER: I was getting e-mails
like we want to buy 100,000 shirts from you, we`re ready to purchase right
now. Here is our credit card. And it just turned out to not be true.
ROGERS: Alibaba founder Jack Ma calls the site a way for small
companies to break into the global market, including this line from a
marketing video from a company`s road show.
MA: We help customers find each other and conduct business on their
ROGERS: But Willis says the international opportunities he has had
through Alibaba have not panned out. And some have even been outright
WILLIS: We took the credit card information and even took a picture
of their ID. And it ended up being a stolen credit card.
ROGERS: But not all small businesses have had the same experience
with Alibaba. For B2B wholesaler Dollar Days international sales have
picked up since listing on the site four years ago. The CEO Marc Joseph
says he gets about 80 new international customers a day from Alibaba, most
of whom like doing business with the American companies.
MARC JOSEPH, DOLLAR DAYS: Their interest is, we are U.S.-based, and
that gives us a lot of credibility.
ROGERS (on camera): Now, Alibaba doesn`t break down how many
customers it partners with domestically, but it does say it gives Chinese
consumers access to millions of merchants around globe. And it`s that
exposure that`s gotten the attention of so many small companies here in the
(voice-over): But that access is not enough to make Willis renew his
contract with Alibaba. And he`s delivering this message for other small
WILLIS: Just do your due diligence and be careful.
ROGERS: Kate Rogers (NYSE:ROG), NIGHTLY BUSINESS REPORT.
MATHISEN: As for the rest of Wall Street today, stocks ended mostly
higher but not by much getting a lift from the gains at Alibaba. And
Scottish voters` decision to remain part of the United Kingdom. The Dow
was up 13 points, ending at a new historic closing high. The NASDAQ was
down 13 points. And the S&P 500 sort of split the difference, it lost one.
For the week, the Dow was up nearly 2 percent. The NASDAQ edged up a
little. And the S&P also rose more than 1 percent.
GHARIB: A huge sigh of relief in the markets around the world, on
Scotland`s historic against independence, keeping the United Kingdom
united. Now, even though a majority of Scots voted no to breaking away,
Scotland may never be the same.
Michelle Caruso-Cabrera has more from Edinburgh, Scotland.
MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-
over): Cheers and jubilation at the no campaign headquarters as the
results rolled in. Scots voted decisively against independence from the
United Kingdom by a wider margin than expected, 55 percent against, 45
percent in favor.
Bagpipes played a lament in the square in Glasgow. Soon after the
results were announced?
UNDENTIFIED FEMALE: Voted no to the question.
CARUSO-CABRERA: The newspapers rolled hot off the presses and U.K.
Prime Minister David Cameron addressed the country.
DAVID CAMERON, UK PRIME MINISTER: The people of Scotland have spoken
and it is a clear result. They have kept our country of four nations
together. And like millions of other people, I am delighted. As I said
during the campaign, it would have broken my heart to see our United
Kingdom come to an end.
CARUSO-CABRERA: The financial markets breathed a sigh of relief,
shares of Scottish banks like the Royal Bank of Scotland rallied sharply,
and the British pound reacted positively, too. The Scots were mixed in
their reaction, just as they were in the vote.
ALISON MACLAUCHLAN, VOTED AGAINST SCOTLAND`S INDEPENDENCE: Passed,
all for it, we look to the future and hopefully everybody acts like grown-
ups and we`ll hopefully make these changes that the government promised
they would make.
GUY PATTERSON, VOTED FOR SCOTLAND`S INDEPENDENCE: I was a yes man.
It is definitely good, though, again. Should be on the ballot, people, but
it wasn`t. So let`s hope for the best.
CARUSO-CABRERA (on camera): Although the Scots voted to stay in the
United Kingdom, the U.K. is unlikely ever be the same again. Before the
vote, Prime Minister David Cameron promised the Scots if they voted against
independence, they would get more control than ever on their financial
affairs. And today, he vowed to deliver on that promise. However, he also
made a surprise announcement. He said that all the nations of the United
Kingdom would get the same powers.
CAMERON: So, just as Scotland will vote separately in the Scottish
parliament on their issues of tax, spending and welfare, so too, England,
as well as Wales and Northern Ireland, should be able to vote on these
issues. And all of this must take place in tandem and at the same pace as
the settlement for Scotland.
CARUSO-CABRERA: The leaders of the U.K. having to cede control, in
order to maintain control.
For NIGHTLY BUSINESS REPORT, Michelle Caruso-Cabrera, Edinburgh,
MATHISEN: Still ahead, now that Oracle (NASDAQ:ORCL) has co-CEOs, are
two heads better than one running a company? The answer may not be what
MATHISEN: Mixed news about jobs, the Labor Department says that 35
out of 50 states added more jobs in August but the unemployment rate rose
in 24 states that same month with so many more Americans looking for work.
Georgia reported the nation`s highest jobless rate at 8.1 percent. The
lowest, North Dakota, thanks to the state`s energy boom, just 2.8 percent.
GHARIB: Investors are trying to figure out what the new management
changes at Oracle (NASDAQ:ORCL) mean for the software giant. As we
reported last night, Oracle (NASDAQ:ORCL) co-founder Larry Ellison is
stepping down as CEO but he`s staying on as executive chairman and chief
technology officer. Also, the firm named two of Ellison`s lieutenants to
share the role of CEO.
So, can two heads be better than one when it comes to running a
Mary Thompson has our story.
MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
After 37 years in the pilot`s seat, oracle`s CEO Larry Ellison will be
replaced not by one, but by two of its wing men.
JEFFREY SONNENFELD, YALE SCHOOL OF MANAGEMENT: This is a very
unstable management arrangement.
THOMPSON: Co-CEOs are rare in corporate America, and if the
arrangement works, experts say it is because the division of labor is
clear. As co-president of Oracle (NASDAQ:ORCL), 52-year-old Safra Catz ran
operations, legal and finance, while 57-year-old Mark Herd handled sales,
service and marketing, responsibilities Ellison said on a conference call
will remain the same despite the title change.
LARRY ELLISON, ORACLE EXECUTIVE CHAIRMAN: I`m going to continue doing
what I`ve been doing over the last several years. They`re going to
continue what they`ve been doing over the last several years.
THOMPSON: Still, the history of CEOs successfully sharing the title
is a mixed one, according to Yale`s Jeffrey Sonnenfeld.
SONNENFELD: Companies only do this on very rare occasions. If there
is some degree of a board battle, some degree of a transition, or if
something is taking place, or if they grown up together like they did in
Goldman Sachs (NYSE:GS), and frankly at Goldman Sachs (NYSE:GS), one of
these co-CEO arrangements didn`t work.
THOMPSON: That would be when Hank Paulson who went on to become
treasury secretary pushed out his co-CEO Jon Corzine. And when Sandy
Weill`s Travelers merged with John Reed`s Citicorp to form a financial
powerhouse Citigroup (NYSE:C), a power struggle followed with Weill pushing
(on camera): Still, experts say co-CEOs can co-exist if they share
values, vision, or maybe a name. Brothers Richard and Tim Smucker ran J.M.
Smucker (NYSE:SJM) until 2011, until Richard took over as a sole CEO, and
while entrepreneurs are said to dislike power-sharing, some pairs powered
the growth of some big U.S. companies.
(voice-over): Technically, Google (NASDAQ:GOOG) founders Larry Page
and Sergey Brin were not co-CEOs, but they did get Google (NASDAQ:GOOG) off
the ground, and continue to run the company alongside Eric Schmidt who they
hired as CEO after year 3.
John Mackey founded Whole Foods and then tapped co-CEO Walter Robb to
help run it.
And Chipotle`s founder Steve Ells co-CEOs with Monty Moran, a rare
example of two cooks in the corporate kitchen, creating a recipe for
For NIGHTLY BUSINESS REPORT, I`m Mary Thompson.
MATHISEN: GlaxoSmithKline gets handed the largest corporate fine ever
in China. And that is where we begin tonight`s “Market Focus”.
A Chinese court found the drug maker`s local subsidy guilty of bribery
and fined it nearly $500 million. The court said its subsidies to doctors
and hospitals to get them to use its products amounted to thinly veiled
bribes. Despite that shares were up a fraction to $47.38.
Shares of Caterpillar (NYSE:CAT), moving the other day, taking a hit
in today`s session. It reported dealer sales fell 10 percent globally in
the three months ending in August, weighed down by a sharp sales decline in
Latin America. The mining equipment maker has struggled recently with weak
demand for its machinery. It has had to close plants and layoff workers.
The stock today down about 2 percent at $102.51.
GHARIB: Germany`s Siemens reportedly plans to offer more than $6
billion for Dresser Rand. This is the American compressor and turbine
maker. Earlier this week, the Swiss company Sulzer said it was in talks
with Dresser about a possible deal, so this new bid could derail that
merger. Shares of Dresser Rand surged about 9 1/2 percent to $79.91.
And SAP, another German company is buying Concur technologies in a
deal worth more than $7 billion. Concur makes software to help employees
manage their expense accounts. The deal will allow SAP, a huge software
company, to expand into this travel-related software for hotels and tourism
services. Shares of SAP fell more than 4 percent to $73.97. Concur spiked
more than 17 percent to $126.82.
MATHISEN: U.S. sanctions against Russia over its actions in Ukraine
are impacting the nation`s biggest oil company. ExxonMobil (NYSE:XOM) says
it will stop drilling in exploratory well and the Russian arctic, in
partnership with Moscow`s state-owned oil company Rosneft, in order to
comply with those sanctions. Now, drilling had been planned to stop next
month ahead of the Arctic winter anyway.
GHARIB: Our market monitor didn`t get swept up in all the frenzy for
Alibaba today. He is Charlie Bobrinskoy, vice chairman and portfolio
manager at Ariel Investments.
Charlie, nice to have you back on the program.
CHARLIE BOBRINSKOY, ARIER INVESTMENTS VICE CHAIRMAN & PORTFOLIO
MANAGER: Thanks for having me.
GHARIB: So you were not buying Alibaba. Tell us why.
BOBRINSKOY: Well, nobody bought shares in Alibaba. You can`t buy
shares in Alibaba. You brought shares in some Cayman Island holding
company which has a contractual agreement that the Chinese government has
set up. But in fact, the Chinese are famous for not respecting contract
rights and for the rights that come with normal corporate governance.
So, we`re very skeptical of this whole arrangement. The Chinese-
American history is full of American companies that have made very good
investments with 40-year leases only to have those leases teared up when
they look too good for the American investor.
MATHISEN: Let`s move on to some companies, Charlie, that you actually
do like, starting with the first pick tonight. And that is Western Union
(NYSE:WU). You got a price target at $23 a share.
BOBRINSKOY: We`re value investors. We think the one thing that works
in the stock is buying things that others don`t like when it`s trading
cheap. Western Union (NYSE:WU) is trading at about 11 times earnings,
people are very focused on the iPhone, taking away transfers within the
U.S. But that`s only 8 percent of Western Union (NYSE:WU) business. The
rest of the business is cross-border.
GHARIB: And you like — looking for value stocks, you like Stanley
Black & Decker (NYSE:SWK), that`s SWK. Tell us what you like about it.
And what`s the target on the stock?
BOBRINSKOY: Most housing-related stocks are trading at big levels,
because everybody knows that housing starts are going to improve from their
current level about a million to more like historical average of a million
five. When that happens, the construction workers are going to use DeWalt
tools, you and I are going to buy Black & Decker. And the whole housing
recovery is going to help Stanley Black & Decker (NYSE:SWK) in a big way.
MATHISEN: So you like drills, you like telegraphs and money — I
know, Western Union (NYSE:WU) is really a telegraph company. And you also
have another old school pick, it`s IBM.
BOBRINSKOY: Absolutely, an out of favor name that people love to hate
but in fact, IBM is on the forefront of big data when governments and
companies are trying to take advantage of all the data that they have
today. IBM is absolutely a leader in that cloud-based data analysis. The
Watson computer that keeps winning “Jeopardy” is just an example of what
they`re doing with big data. They will be a very big successful software
company in the future.
GHARIB: Charlie, as a value investor, is it hard to find value in
BOBRINSKOY: That`s a good question. It is harder, that`s for sure.
Three or four years ago, we were looking at these kinds of companies.
There were lots of companies trading at 10 or 11 times earnings. But now,
the average quality company is more like 16.
So, I would say the market has gotten pricier, a little bit above fair
value but still really cheap relative to bonds.
MATHISEN: You know, several things got taken off the table this week.
The Fed, Scottish independence, now Alibaba. Quickly, for the rest of the
year is it green light for stocks, yellow light, red light?
BOBRINSKOY: Let`s call it yellow light. We`ve had a wonderful run
for the last year, things have been very good. I think they`re going to be
good. Let`s call it high single, low double digit low returns for the next
GHARIB: Charlie, thanks for coming on the program. Have a great
BOBRINSKOY: Thanks for having me.
GHARIB: Charlie Bobrinskoy with Ariel Investments.
And coming up, what thousands of people across the country stood on
line to get, some for hours, others for days, was it worth the wait?
GHARIB: There is a brand-new Cadillac in the works. General Motors
(NYSE:GM) says it will begin to build the all-new high-end luxurious car
next year at its Detroit area assembly plant, where it currently builds a
high breed electric caddy and some other G.M. autos. G.M. says the new
Cadillac will be a rear-wheel drive sedan. The new model`s name, well,
that`s still a secret under the hood.
GHARIB: And finally tonight, Apple (NASDAQ:AAPL) fans came out by the
thousands today from coast to coast, looking to get their hands on the all-
new iPhone 6 and iPhone 6-Plus smartphones.
Josh Lipton was right in the middle of all the excitement and has more
on Apple`s big day.
JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): From
New York City to Chicago, to Palo Alto, California. At 8:00 a.m. local
time, the wait was over and the iPhone6 and 6-plus went on sale.
More than 4,000 people gathered outside Apple`s New York City stores.
The lines, the flagship location on Fifth Avenue stretched 10 city blocks.
Some had even been there since Labor Day.
And companies like McDonald`s (NYSE:MCD) were cashing in on free
publicity, handing out sliced Apples to weary iPhone groupies. But the
biggest winners were folks like Andreas Gibson.
UNIDENTIFIED MALE: This is 10 times crazier than it was last year.
It`s been kind of fun.
LIPTON: At the Palo Alto store, Apple (NASDAQ:AAPL) CEO Tim Cook made
a surprise appearance. Cook shook hands and took selfies with people who
lined up here to get their hands to new phones. When asked if he was using
the iPhone6 or larger 6-plus, Cook said —
TIM COOK, APPLE CEO: Both, I`m lucky.
LIPTON: Now, demand is going for these new iPhones. Apple
(NASDAQ:AAPL) said the pre-orders reached 4 million in just 24 hours. And
analysts at RBC say Apple (NASDAQ:AAPL) could sell 10 million iPhones just
Josh Lipton, NIGHTLY BUSINESS REPORT, Palo Alto, California.
GHARIB: Well, you know, Tyler, I got my iPhone but I pre-ordered. I
was one of the four million.
MATHISEN: You have it now?
GHARIB: I could be getting it in four weeks, I am glad I didn`t stand
MATHISEN: And I`m an android guy. So —
GHARIB: That`s NIGHTLY BUSINESS REPORT for tonight. Have a great
weekend. I`m Susie Gharib.
MATHISEN: And I`m Tyler Mathisen. Thanks for watching. Have a great
weekend. And we hope to see you right back here on Monday.
Nightly Business Report transcripts and video are available on-line post
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