Alibaba IPO in 2013?

 | Dec 27, 2012 | 2:00 PM EST  | Comments
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A leaked internal memo from Alibaba Group reportedly shows that the company plans to go public in 2013.

According to reports in the Chinese press, Alibaba plans to begin the IPO process in the second half of next year and actually go public before the end of 2013 or in early 2014.

Other reports in the last few days suggest that shares in the private e-commerce company have recently traded on the private markets valuing the company at more than $50 billion. This is up from $40 billion in October when the deal with Yahoo! (YHOO) closed in which Alibaba bought back half of Yahoo!'s stake in the company.

That's a remarkable increase in value already in a few months.

It's not surprising, given that both Taobao and Tmall continue to be on a tear in China. Earlier in November, Alibaba reported that Tmall recorded $3 billion in revenues in one day of holiday shopping on one of the sites.

This is all good news for Yahoo!. It still owns 24% of Alibaba Group. If these reports continue, it will force investors to more critically evaluate what that stake is worth. 

Up until recently, most Yahoo! sell-side analysts were still using that $40 billion valuation for all of Alibaba Group. If it's already gone up, then their estimates will have to be increased.

At $50 billion, Yahoo!'s stake is worth at least $7.5 billion after taxes, or $6.76 a share. At $60 billion, Yahoo!'s stake is worth $9 billion after taxes, or $8.12 a share. At $80 billion -- which I think might be a more realistic public valuation by the end of next year -- Yahoo!'s stake would be worth $12 billion, or $10.82 a share.

Now, let's take that most optimistic scenario: an Alibaba stake worth $12 billion and cash on its balance sheet worth $6 billion with a Yahoo! Japan stake that's worth at least $4 billion after taxes. That's $22 billion in market cap right there. 

Yet Yahoo!'s current market cap is $23 billion, which means that the core business of Yahoo! is only worth $1 billion. That core business did $1.35 billion in the last year. If you assign an AOL-like valuation to it, Yahoo!'s core should be worth about $9 billion, which means there's an extra $8 billion in value still missing from Yahoo!'s current market cap, or another $7 per share in appreciation to come this year without any other positive announcements from Marissa Mayer.

It should be a Happy New Year for Yahoo! shareholders.

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