Per CNBC reports, Alibaba, in which Yahoo! Inc. (YHOO) has an approximately 22.5% stake, has chosen Barclays PLC (BCS) as the lead underwriter for its Initial Public Offering (IPO). Alibaba will debut on the New York Stock Exchange under “BABA” ticker.
Alibaba is one of the most anticipated IPOs so far. It is also likely to be the biggest as the company is expected to raise as much as $20 billion from the IPO.
Alibaba, owned by Yahoo! Inc., Japan’s Softbank Corp. as well as other founders and senior managers, had scheduled its IPO shortly after the Labor Day, which has historically been a solid time for IPOs. However, there have been no developments on this front so far. The closely watched and highly anticipated IPO is expected to have a huge impact on the U.S. market. Listing on the U.S. stock market will further support Alibaba’s long-term expansion and growth strategies.
Furthermore, Alibaba has already made agreements with many large U.S. banks, such as Credit Suisse Group, JP Morgan Chase, Citigroup (C), Morgan Stanley, Goldman Sachs, Deutsche Bank AG (DB), as underwriters. This indicates how challenging the proceedings could be. Usually a couple of banks handle IPOs but Alibaba has contracted a lot more.
Alibaba originally wanted to debut on the U.S. markets on Aug 8 but was unable to keep with the commitment. There were concerns that volume would be too low during the slow summer month. For most institutional investors and those who are patient, this is not a big deal. But for individual or retail investors who can't seem to wait any longer, the extra month could be a painful wait to get a slice of the Chinese e-commerce giant. This is especially true given that there is a lot of negative talk regarding Alibaba's offering lately.
However, with a huge market presence, planned expansion in the U.S., strong business model and immense future growth prospects, we believe that Alibaba enjoys a competitive advantage and sales flow.
By now, most investors looking forward to jump on the bandwagon have figured YHOO’s stake in the company. It is also true that Japan's Softbank Corporation owns a bigger stake of around 37%. However, most U.S. investors will have a hard time getting hold of some shares of Softbank than YHOO.
Yahoo looks forward to reaping the profits when Alibaba is available for trading but many investors have already started stocking up YHOO shares in hopes of making gains and owning 22.5% of Alibaba indirectly.
YHOO currently has a Zacks Rank #5 (Strong Sell) because we believe there are better buying opportunities or so-called entry points, before Alibaba takes off. What happens then for YHOO stakeholders is something only time can tell.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment