The planned boost of Alibaba’s IPO price could consequently boost Yahoo! Inc. (NASDAQ:YHOO) stock, which has been facing numerous challenges. Yahoo! hasn’t had a smooth run in its core business, a factor that has seen the company come up with several strategic actions to gain traction. In the last one month, the company’s performance has however improved with the stock rising to $40 from $35.
Yahoo! Inc. (NASDAQ:YHOO) is the single biggest shareholder of Alibaba with a 22.5% stake. With the initial public offering showing overwhelming investor demand for the Alibaba stock, Yahoo!’s value is also set to increase, a factor that is likely to impact positively on the giant internet corporation.
Alibaba launched the IPO last week and had the entire stock covered within only 2 days, according to sources. The stock was valued at between $60-$66, a figure which Alibaba is likely to amend today to set a higher price after consultation with large U.S. mutual funds and other key players.
“Demand has been overwhelming since the launch,” said a source, who couldn’t be named because the details are still private. “Increasing the price range was already on the cards from the beginning.”
Some sources have indicated that the price could be increased to at least $70.
If the IPO goes through at a higher rate, Yahoo! Inc. (NASDAQ:YHOO) will get well over $7 billion. Such a figure would give Yahoo! under the leadership of Marissa Mayer, a new lifeline. Marissa Mayer took over the reins in 2012 in a bid to put the company back on its heels after some competitors such as Google overtook the giant. A good use of such proceeds will therefore provide the company with an avenue to revamp its image.
“Alibaba is giving rocket fuel to Yahoo, but the problem is Yahoo still has to develop the engines,”
said Trip Chowdhry at Global Equities Research.
Yahoo! Inc. (NASDAQ:YHOO) had indicated that it will return some proceeds to shareholders and use the rest in new acquisitions to help the company strengthen its core business.