Yahoo’s Alibaba windfall


Yahoo’s Alibaba windfall

Last week, Chinese ecommerce giant Alibaba announced that it would be floating in a gigantic IPO on the NYSE. The latest forecasts say that Alibaba may raise as much as $26 billion, making it the biggest IPO of all time, surpassing Facebook’s $16 billion in 2012 and Visa’s $19.65 billion in 2008.

Yahoo, which has a 22.6% stake in the Chinese company, thanks to an investment in 2005, stands to own a multi-billion dollar share of Alibaba. Post listing Yahoo will experience its windfall as a mixture of cash and continued equity in Alibaba, and because of agreements between the two companies, they’ll have to unload a significant portion of their holdings the minute Alibaba goes public. Unfortunately for Yahoo, they’ve become somewhat dependent on their Alibaba investment to keep their stock price rising, as they continue to struggle in their core business. No doubt we’ll see Yahoo’s shopping spree of 2013/14 continue, as they gobble up companies in an attempt top build a content driven search and advertising company for this century.

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