Yahoo rakes in another jackpot from China’s Alibaba Group IPO

Yahoo is making amends for years of blundering with one smart move: an early investment in China's Alibaba Group that has turned into a multibillion-dollar boon.

Updated: September 19, 2014 8:30 PM IST

By Press Trust of India

Yahoo rakes in another jackpot from China's Alibaba Group IPO

San Francisco, Sep 19: Yahoo is making amends for years of blundering with one smart move: an early investment in China’s Alibaba Group that has turned into a multibillion-dollar boon. The latest windfall will be delivered with Alibaba’s record-setting IPO completed late yesterday, which is expected raise up to USD 25 billion for the e-commerce company and its early backers.

Alibaba’s shares will begin trading for the first time on Friday on the New York Stock Exchange. Yahoo is in line to make anywhere from USD 8.3 billion to USD 9.5 billion from the initial public offering, depending on whether investment bankers exercise their right to buy additional stock in the deal.

The payoff supplements the USD 7.6 billion jackpot that Yahoo collected two years ago after selling another chunk of its Alibaba holdings and reworked a licensing agreement with the Chinese company.

Even if Yahoo ends up selling its maximum allotment of 140 million shares in the IPO, the Sunnyvale, California, company will still retain a roughly 16 percent stake in Alibaba Group Ltd.

Worth another USD 26 billion to USD 27 billion. Not a bad return, considering Yahoo acquired its Alibaba stake for USD 1 billion in 2005 in a deal engineered by company co-founder Jerry Yang and former CEO Terry Semel.

The Alibaba investment has helped ease the pain of Yahoo’s struggles in Internet advertising, the heart of its business. Yahoo’s annual revenue has slipped from a peak of USD 7.2 billion to projected USD 4.5 billion this year, a decline of nearly 40 per cent.

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