Alibaba reportedly opting for U.S. IPO; Yahoo rises


Chinese portal Sina reports Alibaba (ABABA) plans to go public in the U.S. rather than Hong Kong, and has hired Morgan Stanley and Credit Suisse to assist with the offering.

Yahoo (YHOO +1.5%) is trading higher. A U.S. IPO would allow Alibaba to tap into the white-hot demand shown by American capital markets for fast-growing Internet companies (whether U.S. or Chinese).

Yahoo sold off last month after reporting Alibaba's Q3 revenue only grew 2% Q/Q (Y/Y growth was still 51%). RBC has assigned the Chinese e-commerce leader a $150B valuation.

Previous: Alibaba signals IPO delay

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Comments (8)
  • 22643611
    , contributor
    Comments (2099) | Send Message
     
    I can't find this on any american feeds.
    28 Feb 2014, 12:10 PM Reply Like
  • TheLittleGoat
    , contributor
    Comments (105) | Send Message
     
    http://fxn.ws/1obEcut
    28 Feb 2014, 01:35 PM Reply Like
  • Fundy
    , contributor
    Comments (115) | Send Message
     
    Yahoo owns 25% of Alibaba. Amazon currently has a market cap of $166B, 25% of which is $41.5B. Alibaba is twice as large as Amazon, so assuming it has roughly the same market appreciation then 25% of Alibaba will reach $83B. This gives Yahoo more than a 100% upside based on the Alibaba investment alone, and that's not even taking into consideration their own business. I decided to take a stake today based on this analysis, let me know if you have any thoughts.

     

    Edit: I should add that this is obviously a very rough analysis I'm crunching through numbers to get a more thorough valuation right now.
    28 Feb 2014, 12:54 PM Reply Like
  • Fundy
    , contributor
    Comments (115) | Send Message
     
    The below numbers are based on another very rough analysis using a quarterly extrapolation from Alibaba (last quarter * 4) and a quarterly division from Amazon (market cap / PE).

     

    Amazon
    ---------
    Quarterly Earnings: $67mm
    Annual Earnings: $267mm
    PE: 620
    Market Cap: $166B

     

    Alibaba
    ---------
    Quarterly Earnings: $707mm
    Annual Earnings: $2.8B
    PE: 100 (Estimated)
    Market Cap: $280B
    Market Cap (25%): $70B

     

    Using the above numbers, even if Alibaba is at less than 1/6th of Amazons P/E then Yahoo's stake in Alibaba alone presents a 79.5% upside. The real question remains on whether or not the market will price Alibaba for years in the future as it has for Amazon or if it's a more conservative P/E. Any way you cut it, Alibaba has huge growth potential for Yahoo, who is already earning roughly $1.5B / year in earnings on their own.
    28 Feb 2014, 01:26 PM Reply Like
  • TheLittleGoat
    , contributor
    Comments (105) | Send Message
     
    Yahoo has taxes to pay on their Alibaba stake as it it a 90%+ gain from my understanding so that will eat into valuation to Yahoo. But your main point holds, Alibaba is a very valuable and well run company that I think IPOs over 150B at a minimum.

     

    I think 280B is a bit of a stretch. 170B IPO price with it trading to 200B right away is my current estimate.
    28 Feb 2014, 01:39 PM Reply Like
  • Stkpicr
    , contributor
    Comments (8) | Send Message
     
    I wish we had a date or at least a more zeroed in time frame for the IPO launch.
    28 Feb 2014, 01:49 PM Reply Like
  • D.B. Kim
    , contributor
    Comments (147) | Send Message
     
    Don't forget, Alibaba has an agreement that it has the right to buy half of YHOO Alibaba stake at the IPO price, which they will most likely definitely execute....this gives Alibaba a little incentive to want to be valued on the lower side.... which is why I believe CEO Jack Ma likes that $100-$150 bln number... Softbank SFTBF has nearly a 40% stake in Alibaba.. and has been weighed down by its Sprint investment... is another one to consider in the Alibaba IPO trade.. ...I think both stocks have upside... in the case of YHOO .. you're basically have a very modest valuation being accounted for its own current business and the April quarter will be important after January's letdown.... .and SFTBF is at least 20% undervalued based on the SOTP analysis alone....
    1 Mar 2014, 07:58 PM Reply Like
  • sofiacaden
    , contributor
    Comments (43) | Send Message
     
    Alibaba is preparing for an IPO, the current market trend of moving towards web/mobile will keep the company in the race in the global market.
    21 Mar 2014, 01:28 AM Reply Like
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