I've been writing a lot about the messaging space since Facebook (FB) snapped up WhatsApp last week for $19 billion.
One of the biggest names overseas in the messaging space is Line, which is dominant in Japan, although it is owned by a Korean parent.
WhatsApp will never dominate in Japan, Taiwan, Spain or several other key geographies. It will also be shut out of China, because that's where Tencent's WeChat is the top messaging app. The only other app that has some scale in China is Line.
Line had been on a path to an IPO by the middle of this year. It had floated the idea of getting a $30 billion valuation.
However, last night, news broke that Softbank was considering a major investment into Line before its IPO. The valuation would be at $15 billion. Line's parent indicated in the Bloomberg story that it was slowing down its IPO plans so that it could study this offer and others it had received.
This makes a lot of sense for Softbank. My guess is that there's also another big company interested in Line: Alibaba.
Alibaba has been proceeding very slowly and deliberately toward its own IPO in the last year. Alibaba was caught off guard by the sudden explosion of WeChat in China. WeChat is threatening to Alibaba, because so many people have quickly been attracted to WeChat and have already started using it for e-commerce transactions.
Before the Chinese New Year, Tencent revealed that millions of Chinese had sent money to each other (a tradition) via WeChat. Jack Ma of Alibaba immediately wrote a blog post to call the move a "Pearl Harbor attack" on Alipay.
Since such a large group of Chinese use a service, rely on it and then start to get trained on using it for payments, it's a very dangerous force that could destabilize the prominence that Alipay has today in the world of Chinese payments, and Alibaba's main e-commerce sites as well.
Alibaba's first response to this threat has been to try and launch its own version of WeChat, called Laiwang. It has been unsuccessful in gaining traction.
The next step is to obviously make a big, splashy acquisition. Line fits the bill, but it will be expensive. It would likely cost $30 billion to buy all of it now. That's going to be tough for Alibaba to do before its IPO, unless it is willing to carve off a part of its pre-IPO shares to the Line owners.
However, there are few other choices for Alibaba. It could buy KakaoTalk, but it's partly owned by Tencent and it is dominant in South Korea but not in China. Line is the only other service besides WeChat to have traction in China.
The most likely outcome is a joint bid from both Alibaba and Softbank for Line in the coming weeks.
Alibaba needs to deal with this matter before its own IPO.