Chinese e-commerce giant Alibaba Group on Tuesday filed in the U.S. for an initial public offering to raise up to $1 billion — a figure that analysts expect will rise — which will deliver a cash windfall to minority stakeholder Yahoo.
Alibaba, founded in 1999, claims it is the biggest e-commerce company in the world. For the nine months ended Dec. 31, 2013, the company generated revenue of $6.5 billion and net income of $2.9 billion. About 84% of Alibaba’s revenue comes from two main websites: Taobao, a consumer-focused e-commerce marketplace, and the business-to-consumer Tmall site.
Yahoo holds a 24% stake in Alibaba, and it’s set to sell 40% of that holding after the Alibaba IPO, according to the agreement between the two companies. That could yield more than $10 billion in proceeds, depending on the pricing of the IPO. Yahoo paid about $1 billion for its original 40% stake in Alibaba in 2005.
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Alibaba’s IPO is expected later this summer at the earliest and analysts have frantically speculated that its initial valuation could be in the $150-$200 billion range.
Analysts also are mulling what Yahoo might do with the cash from the Alibaba offering, which will add to the Internet media company’s $4.6 billion cash and equivalents on hand as of March 31, 2014.
Yahoo could make a bid for rival AOL, or focus on acquiring smaller web companies to build traffic and challenge Google. One specific area Yahoo may pursue is bulking up its video business. The company last year launched unsuccessful bids for Hulu and Dailymotion, and CEO Marissa Mayer could be in the market to acquire a YouTube multichannel network.
Last week, Yahoo announced deals for its first TV-length scripted series at its Digital Content NewFronts: “Other Space,” a sci-fi comedy from exec producer Paul Feig, the writer-producer behind NBC’s “Freaks & Geeks” and director of “Bridesmaids”; and “Sin City Saints,” from exec producer Mike Tollin (“Smallville,” “One Tree Hill”) and director Bryan Gordon (“Curb Your Enthusiasm”).