Yahoo! Inc (YHOO): NYU Professor Estimates Alibaba at $142.6 billion Before Its IPO


Yahoo! Inc. (NASDAQ:YHOO) is a major Alibaba shareholder. Yahoo! Inc. (NASDAQ:YHOO) shares has been a tracking stock for Alibaba for the past couple of years. One of the most widely discussed piece of news recently has been the upcoming Initial Public Offering of Alibaba Group Holding Limited, a large e-commerce company headquartered in China. In a recent intervention on CNBCAswath Damodaran, a finance professor at NYU’s Stern School of Business said that he estimates the company at $142.6 billion, which represents around $60 per share.

“I think it’s a great company, I was actually surprised by how much money the company makes. It’s a phenomenal money maker. But I think it’s biggest problem is that it’s already 80% of the market in big segments. The growth has to come from the overall market growing and that kind of puts a cap on the how much they can grow,” Mr. Damordan said.

The full interview with Mr. Damodaran, where he explains his opinion on Alibaba’s valuation can be watched below:

According to its filing with the Securities and Exchange Commission from May 6, Alibaba’s Gross Merchandise Volume amounts to almost $250 million, and it has around 231 active buyers per year with over 11 billion orders per year. In this way, the company amasses the lion’s share of the total GMV of China, or slightly above 76%.

After the company goes private, one of the key people of the company, its executive chairman, Jack Ma, has a good chance to increase his wealth, since his stake amasses close to 9% of the company’s ordinary shares. However, several entities also own significant holdings in the company. One of them is Yahoo! Inc. (NASDAQ:YHOO), which holds around 523.6 million shares, equal to 22.6% of the stock. Yahoo!’s stake is divided between its headquarters in the U.S., and Yahoo! Hong Kong Holdings Limited, which owns 430.9 million shares of the aggregate holding.

However, as the company stated in the filing, it plans to buy back 208 million shares held by Yahoo! or to ask it to sell them in the IPO. Earlier in 2012, Alibaba has repurchased from Yahoo! Inc. (NASDAQ:YHOO) a total of 523 million ordinary shares for $13.54 apiece.

At the same time, Alibaba plans to sign a voting agreement with its principal stakeholders, and ask Yahoo! Inc. (NASDAQ:YHOO) to vote its shares for the election of the Alibaba Partnership’s director nominees and one director nominee from the largest shareholder, SoftBank, which owns over 34% prior to the IPO, at each annual shareholders meeting.

Even though Alibaba has not yet revealed the pricing of its offering, investors can already start considering adding the company to their equity portfolios.