A Potential Blockbuster of an IPO

 | Jan 06, 2013 | 6:00 PM EST  | Comments
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There are many lists going around now about what will be the biggest initial public offerings of 2013. On them, you often see names like Twitter and Square. You don't usually see the name of Alibaba Group on these lists.

Yet there's no question that, if Alibaba were to IPO in 2013, it would be a blockbuster. There have been several reports in the last few days that Alibaba's shares are already being exchanged privately at around a $50 billion valuation. If the company went out this year, I think it's likely to reach something close to a $60 billion valuation. That would put it in the Facebook (FB) ballpark for IPO valuations.

At that price, Alibaba would be valued just slightly less than China's biggest Internet company, Tencent.

Here in the U.S., we don't talk as much about Tencent as we should. That's because, even though it's highly successful in China, it's listed on the Hong Kong stock exchange. You can only buy it over the counter in the U.S.

Nevertheless, the stock of Tencent has been on a tear of late, with a more-than-63% gain in the last year.

Would it be worth more if the company were listed in the U.S. instead of Hong Kong? That's difficult to say. Most Chinese Internet stocks have chosen to list on the Nasdaq, and Tencent is definitely an anomaly in choosing to be listed only in Hong Kong. However, it's hard to say that Tencent's decision has hurt them.

In 2007, Alibaba listed its business-to-business exchange site -- Alibaba.com -- on the Hong Kong exchange only. At first, its shares went sky-high. Later, however, they sank. In fact, they got to such low levels that Alibaba Group decided to take Alibaba.com private last year. Some speculated this move set the stage for a bigger Alibaba Group IPO.

In the last week, I have heard some speculation that Alibaba will IPO this year, and that it will choose to do so via a dual listing on both the Nasdaq and the Hong Kong exchange. This would be the best of both worlds, really.

At this point, Alibaba's story is better known and appreciated in Asia. In the U.S., it's still only a story appreciated by a few who are familiar with it. By tapping both exchanges, Alibaba would ensure the maximum number of brokers would get out to support the stock, and with the likelihood of finding interested buyers on both sides of the Pacific.

These details -- on if, when, and where Alibaba will IPO -- have a major bearing on Yahoo!'s (YHOO) stock price. At the moment, Yahoo still owns more than 20% of the company. In the past three months, what's been driving Yahoo's price has been optimism about new CEO Marissa Mayer, as well as a share buyback with cash from the first-tranche sale of Yahoo's Alibaba stake, which closed in October. Any new money that Yahoo could get from an Alibaba IPO still isn't priced in to the stock. 

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