Alibaba IPO Filing Indicates Yahoo Undervalued

Alibaba filed with the SEC Tuesday evening and investors want in on its forthcoming IPO. But, until the Chinese company debuts on a U.S. exchange later this year, would-be Alibaba shareholders are bidding up Yahoo, $YHOO, in anticipation of the company making billions off of its 24% stake in the world’s largest e-commerce Web site.

$YHOO not just a rumor anymore watch for yaho to finally push past $37 tomorrow in earnest

— Robb M to protect the innocent (@Unicorn_Apocalypse) May. 6 at 05:48 PM

@CaballoBlanco damn, noticed there is a lot of open interest and volume in $yhoo OCT calls… looking to long ali and get yahoo calls..

— Chuck (@Cjgross78) May. 6 at 05:51 PM

Yahoo rose about 1% in after hours trading to $36.49-per-share as Alibaba’s SEC registration circulated the Web. The company disclosed key information in the filing. Highlights include:

$248 billion in merchandise sold on Alibaba’s retail sites last year.
$231 million “active” buyers visit Alibaba each year.
On average, active buyers order merchandise 49 times each per year.
136 million mobile annual users
$37 billion in merchandise ordered via mobile devices last year
Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley and Citigroup will underwrite the offering.

What wasn’t in the filing was the IPO price or a real number of how much Alibaba will raise. In the registration document, Alibaba says it plans to raise a maximum of $1 billion, though most investors say that is a placeholder number that is up to 20X less than Alibaba actually intends to raise.

$YHOO $1 billion figure is a placeholder & likely 2 change once bankers start to gauge investor appetite. The deal could reach >$20 billion

— Catalystinvestor (@Catalystinvestor) May. 6 at 05:40 PM

Without an IPO price, investors can’t pinpoint a valuation for Alibaba. But, based on the valuations of other e-commerce sites such as Amazon, $AMZN, analysts estimate Alibaba’s worth between $115 and $245 billion.

Amazon has a market cap of $136.84 billion and made $74.45 billion in 2013. Unlike Alibaba and eBay, $EBAY, Amazon does not report the value of all merchandise sold on its site. But trade publication Internet Retailer estimated Amazon’s gross merchandise volume to be around $92 billion in 2012. That number undoubtedly grew in 2013 given that Amazon’s net sales climbed 22%.

The midpoint of Alibaba’s value range would peg the company at $180 billion. That would make Yahoo’s stake worth $43.2 billion. Yahoo’s market cap, as of Tuesday’s close, was $37.64 billion.

Some investors on StockTwits anticipate that Yahoo will skyrocket tomorrow on the Alibaba valuation alone.

$YHOO Preview is $195 billion, yahoo mkt cap is $38billion and the own 24%… Should be 50bil just on AliBaba

— Michael (@Mrbergmann47) May. 6 at 05:51 PM

$YHOO This will be well above 40 by the time of the ipo. Should be 40 by EOW

— alex miller (@leemiller23) May. 6 at 05:35 PM

simple math. assume $YHOO 's $30B cap is worthless. it owns 24% of 200B of alibaba. thats $48B + its $4B cash = $52B. undervalued

— Sickled Systems (@sickledsystems) May. 6 at 05:30 PM

Others, however, say the Alibaba IPO is overhyped and that it could prove less valuable than most think. Amazon, as part direct seller, part marketplace, arguably takes in more profits than a marketplace alone. And Amazon often struggles with profitability.

$YHOO Aliababa will ipo at $ 100 billion only and Yahoo will crash.

— Barry Bye (@BarryBye) May. 6 at 05:13 PM

But most StockTwits’ investors are bullish on Alibaba and Yahoo’s stake. Sentiment on Yahoo is 90% bullish, according to StockTwits’ analytics.

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