Despite Latest Alibaba IPO Rumors, Yahoo Deal Creates Incentive to Offering by End of 2015
It seems like a month does not pass without another rumor about when Chinese Internet powerhouse Alibaba Group will have its much-anticipated IPO.
Today, in the latest loosely-sourced report, a newsletter quoted a Chinese-language site on a leaked memo that allegedly said the preparations would begin in the second half of 2013 for a public offering in late 2013 or early 2014.
Maybe not so fast, according to sources close to the situation, who note that incentives in a recent stock buyback with major shareholder Yahoo could drive a public offering to the end of 2015.
The timeframe is not a deadline, of course, but Alibaba benefits more if it does its IPO by then. Sources said the IPO will depend entirely on market timing and there is not a current plan to do so soon.
The news matters a great deal to Yahoo investors, especially because much of its market valuation is still made up of the remaining 22 percent stake it still holds in Alibaba, as well as its assets in Yahoo! Japan.
Yahoo completed the sale of half its stake in Alibaba earlier this year for $7.6 billion, netting the Silicon Valley Internet giant about $4.5 billion — most of which is being used for repurchases of shares.
As Alibaba noted at the time of that deal:
“Under the terms of the agreement with Yahoo!, Alibaba Group has the right to repurchase one-half of Yahoo!’s remaining stake upon a qualifying initial public offering in the future. Yahoo! originally acquired its stake in Alibaba Group in 2005 in exchange for US$1 billion and sale of its Yahoo! China business to Alibaba Group.”
Since then, Alibaba’s value has risen dramatically on a strong performance in its various units, including e-commerce giant Taobao.
At the time of its stock buyback with Yahoo, Alibaba’s value was $40 billion, which some think will rise strongly over the next few years.
That’s no guarantee, of course, and it depends how Alibaba’s business in China and elsewhere fares. That has not stopped some Yahoo investors, in fact, from flogging gigantic Alibaba IPO valuations, despite the fact that the company is mulling whether to keep it lower to avoid a Facebook-like debacle.
And while it’s clear the company is eventually headed for an IPO, those close to the situation said its management is not in any rush, especially with a recent influx of capital from investors such as Silver Lake, DST Global, Temasek and Yunfeng Fund.
“So many rumors have been floated on this IPO and we can expect a lot more until it actually happens,” said one source.