What Yahoo Could Gain From Alibaba's Long-Awaited IPO

Yahoo's investment in Alibaba nine years ago is about to pay off to the tune of $8 billion if the company's IPO estimates turn out to be correct.
Posted at 1:26 PM, Sep 06, 2014

On Friday, Chinese e-commerce giant Alibaba came one step closer to filing its long-awaited initial public offering, and early investor Yahoo one came step closer to reaping its massive benefits.

In documents filed with the Securities and Exchange Commission, Alibaba estimates the price range for its shares will be between $60 and $66 — or as much as $24 billion total. And that would value the company at about $155 billion.

Essentially, the company is worth a lot. In fact, it would be the largest-ever IPO in the U.S. surpassing both VISA's $17.9 billion IPO in 2008 and Facebook's $16 billion IPO in 2012. 

And that’s good news for Yahoo, which in 2005 purchased a 40 percent stake in the company for $1 billion — something Alibaba used to expand its operations.

After selling about $7 billion worth of shares in 2012 back to Alibaba, Yahoo plans to make as much as $8 billion more by selling about a quarter of the shares it has left.

According to Bloomberg, the windfall will triple Yahoo’s current reserves, which the business news site says was around $4.3 billion at the end of June.

So what does Yahoo CEO Marissa Mayer plan to do with this new horde of cash?

Well, CNN speculates she’ll try and woo Wall Street with either more acquisitions like Tumblr or she’ll try to please investors by giving some of it to shareholders.

Speaking to CNBC, a New York University finance professor suggested Yahoo calls it quits with the acquisitions and start giving money back to its shareholders.

Talking about acquisitions, he says, "Yahoo is actually better off just throwing in the towel. They have lost the game to others (Google, Netflix, Amazon) and it is time for Marissa Mayer to concede and not throw good money after bad."

Alibaba’s IPO estimate has certainly turned headlines around in favor of the struggling Internet company as well.

Forbes said Yahoo's core business in March was "valued at less than nothing" but now, The Wall Street Journal reports it's valued at $11 billion. 

And according to The Wall Street Journal, Yahoo could keep more of the profit it'll make from selling shares by keeping them in Hong Kong and avoid having them taxed. Alibaba's stocks will reportedly begin trading as early as September 19. 

This video contains images from Getty Images and Flickr