Yahoo! Inc. (YHOO) Rakes in Profits, Alibaba IPO Risky Yet Attractive Investment for U.S. Hedge Fund Managers

Yahoo! Inc. (NASDAQ:YHOO)’s Alibaba Group Holding Ltd’s first public offering is scheduled for tomorrow and the unrest in buyers is mounting with every passing hour. A group of U.S. fund managers is concerned about the risks involved with Alibaba considering its corporate governance structure or the bull market fatigue but they are not going to let it pass either because of the cheap investment opportunity.

On the contrary, most of the investment groups are considering this an excellent investment opportunity including Thornburg Investment Management Inc. and Clough Capital Partners LP. In fact, Krane Fund Advisors LLC went on to create an exchange-traded fund to purchase the shares of the biggest e-commerce retailer of China.

Yahoo! Inc. (YHOO)

Yahoo! Inc. (NASDAQ:YHOO) is likely to make up to $8.1 billion at the mid-range of the target price for Alibaba’s shares as the company is going to sell 121 million shares in the IPO. The company will maintain its 16.3% stake in Alibaba after the IPO and with the chances of Alibaba crossing the IPO of Agricultural Bank Of China Limited (HKG:1288) in 2010, Yahoo! Inc. (NASDAQ:YHOO) is all set to increase its profit margins further.

ConvergEx Group Inc. conducted a survey among fund managers with more than $400 billion under their management about their participation in the IPO and nearly 49% are likely to purchase the shares of Alibaba Group Holding Ltd. One of the most important reasons behind the willingness to invest in the company is the fact that the web properties of Alibaba completed transactions worth $248 billion last year.

Some analysts are of the opinion that even if Alibaba raises its target price from the new $66 to $68 range, the investors would value multi-year growth story behind the company and not the price, said Eric Brock, Clough Capital portfolio manager.

Another important factor is the tremendous growth in Chinese retail market, which has nearly 632 million Internet users and the number is likely to reach 850 million by 2015, as per government records. The online retail market is likely to touch $395 billion next year in the second-largest economy of the world, according to McKinsey & Co. Yahoo! Inc. (NASDAQ:YHOO) is likely to continue to benefit from growth of Alibaba.

This article has been written by Prakash Pandey.

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“Yahoo! Inc. (YHOO)’s Alibaba Rule Out Listing on NASDAQ to Avoid Facebook (FB)’s First IPO Fate”

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