Alibaba Group Holdings Ltd is going to be the biggest IPO that will put Alibaba at a market value of $200 billion. However, one of the primary stake holders, Yahoo! Inc. (NASDAQ:YHOO), is likely to benefit from the deal but what would happen to the company once it exhausted its trump card.
Yahoo! Inc. (NASDAQ:YHOO) has reported a decline in its revenue for the past two years but its shares have doubled in the means time. Yahoo’s 22.4% stake in the company is the only reason for this continuous growth, as until now it was one of the very few options for US investor to invest in the Chinese tech giant.
However, the question arises that after the IPO of Alibaba Group Holdings Ltd and availability of its shares in the open market, would it be possible for Yahoo! Inc. (NASDAQ:YHOO) to retain the investors. The company is expected to sell around 140 million shares or 27% of its stake in Alibaba Group Holdings Ltd. The proceedings are likely to push the shares a bit higher considering the fact that Yahoo is likely to distribute half of the profit in its investors. The remaining share of Alibaba will fluctuate with respect to the public trading of its stocks.
Alibaba’s IPO would allow investors to invest direct into the company making Yahoo an obsolete investment vehicle. Secondly, Yahoo! Inc. (NASDAQ:YHOO)’s performance has not been remarkable in the past few years and the company has struggled to keep up with the changing user preferences. It is highly likely that the company might consider some pricey acquisition with the rest half of the proceedings of the IPO, which might put investor interests in jeopardy. For now, what we can do is to wait and watch it all happen after September 18.
This article has been written by Prakash Pandey and edited by Serkan Unal.