By Sarah Roden
Yahoo! is poised to release fourth quarter earnings tomorrow, January 27th after market close.
Estimates agree that Yahoo’s earnings per share will drop from $0.46 to $0.29 on a non-GAAP diluted basis; a 37% year-over-year decrease. Analysts estimate that revenue will drop 1% to $1.2 billion. BrightRoll, an automated video advertiser which was acquired by Yahoo in December, is expected to contribute to quarterly revenue.
Aside from the numbers in the earnings report, analysts are looking forward to hearing how Yahoo CEO Marissa Mayer will handle the transfer of Alibaba shares. Yahoo still owns 15% of Alibaba, or about 384 million shares. Investors are waiting for Mayer to announce how she will ensure that Yahoo shareholders receive the optimal value from Alibaba with minimum tax burden. Investors will also be looking for just how many shares of Alibaba will be sold by Yahoo, if not all of them.
On January 26th, analyst Mark May of Citigroup reiterated a Buy rating on YHOO with a $63 price target. May noted that once Yahoo discloses its plan for handling its Alibaba shares, the focus will return to “core Yahoo!” He continues, “Despite negative press coverage and consensus forecasts that call for only 2% net revenue growth (ex-FX) this year, we believe core Yahoo! is showing green shoots as fast-growing mobile revenue becomes increasingly material to overall results.” The analyst sees this as a “path to 6-9%+ net ad revenue growth ex-FX in CY15.”
Mark May has rated Yahoo 15 times since February 2009, earning a 73% success rate recommending the stock and a +19.7% average return per Yahoo recommendation. Overall, May has a 63% success rate recommending stocks with a +12.7% average return per recommendation.
Separately on January 26, analyst Victor Anthony of Topeka Capital Markets maintained a Buy rating on Yahoo with a price target of $60. Anthony expects Q4 earnings to be “in-line… with upside risks to estimates due to share gains in search as a result of the Firefox win, and greater mobile traction.” Anthony estimates that search revenue will grow 3% year-over-year, “a deceleration from 5.5% in 3Q.” Additionally, the analyst is expecting display revenue growth -4% YoY (-6% YoY in 3Q) on a 20% growth in ads sold and a 23% decline in the pricing of ads.” Lastly, Anthony also expects Tumblr to “generate $100M in revenues in 2015 and will turn EBITDA positive. However, with the combination of video ads, which will be accelerated by the Brightroll acquisition, native, and search, we expect revenues to surpass guidance by a meaningful margin and again grow strongly in 2016.”
Victor Anthony has rated Yahoo 11 times since April 2013, earning a 91% success rate recommending the stock and a +26.5% average return per Yahoo recommendation. Overall, Anthony has a 62% success rate recommending stocks with a +16.3% average return per recommendation.
On average, the top analyst consensus for Yahoo on TipRanks is Moderate Buy.
To see more recommendations for Yahoo, visit TipRanks today.
Sarah Roden writes about stock market news. She can be reached at [email protected].
Activist investor campaign and involvement
Current situation with shares of eBay strikingly remind one of a very similar situation with Yahoo back in 2012. Back then, a well-known activist investor Daniel Loeb and his hedge fund firm Third Point LLC acquired a large stake in shares of Yahoo Inc, and publicized the hidden value of its Asian assets – namely, a 40% stake in Alibaba and a 35% stake in Yahoo Japan. Management did not understood the hint, and a more hostile and high-profile activist campaign followed. With new CEO and other reforms, corporate governance improved. Shareholder-friendly actions such as share buybacks were taken, and a great amount of shareholder value was unlocked, with a culmination that came in 2014 IPO of Alibaba Group. Shares of Yahoo did not move much in the first year since Third Point’s involvement. However, in May of 2012, signs of progress started to appear: Yahoo’s CEO Scott Thompson resigned. Since then Yahoo shares started a steady move up and returned 228% in a little over 2.5 years.
A similar situation, in my view, is developing at EBay. Carl Icahn, a well-known activist shareholder accumulated a 3.7% stake in the company. Similar to Yahoo, issues of corporate governance were raised by activist investor, as well as the value of a hidden asset (PayPal). It took some time for activist investor’s campaign to bear fruits, but in September of 2014, EBay agreed to spin-off PayPal in 2015 into a separate company.
It seems that now is the perfect time to separate PayPal. On the one hand, growing competition can harm PayPal and take away its leading market position if it remains tied-up with EBay. Once separate, the company will be able to define its own destiny and take any strategic steps to remain competitive and profitable. On the other hand, mobile payments and mobile banking industries present attractive growth opportunities for PayPal. Industry experts think that mobile payments industry is poised to experience tremendous growth during next few years. Gartner Group predicts that global mobile transaction volume and value will grow at an average annual growth rate of 35% between 2012 and 2017. Firm’s analysts forecast that by 2017, it will be a market worth $721 billion with more than 450 million users. Obviously, PayPal is one of the companies that is best positioned to profit from these trends.
To arrive at our valuation, we made few simplifying assumptions. Financials used are annualized numbers that are based on first 9 months’ results of EBay. To arrive at PayPal’s EBITDA, we used EBay’s EBITDA/Revenue ratio and Payments segment revenue. PayPal’s 2014 estimated EBITDA is $2,107 million. Using an EV/EBITDA valuation multiple of x15, annual EBITDA growth rate of 20%, and free cash flow that equates to 80% of EBITDA, in three years PayPal can be valued at $62 billion or about $50 per share. To put this into perspective, such amount represents 90% of EBay’s current value.
Remaining EBay’s business is estimated to generate $2,657 million EBITDA in 2014. Assuming a 10% growth rate and a valuation multiple of x15, by the end of 2017 EBay can be valued at $61 billion or about $49 per share.
EBay’s current net debt is a cash holding of $2,795 million or about $2.25 per share.
These three parts together add up to a little over $100 per share, providing investors with a possible upside of 80% over a three year holding period. Involvement of an activist shareholder, attractive valuation and growth prospects, and recently announced spin-off of EBay’s PayPal business provide a realistic path to unlock shareholder value. We therefore believe that shares of EBay present a very attractive investment opportunity for long-term, value-oriented investors.
Apple Inc. (NASDAQ:AAPL) is rumored to drop rival Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) as the main search engine for Safari. The partnership is set to end early next year, and it is reported Apple will either go with another search engine or perhaps launch its own.
Apple could launch search engine
Reports of Apple potentially developing a search engine is nothing new. Four years ago, Piper Jaffray analysts predicted the Cupertino-based tech giant would eventually launch a mobile search engine by 2015. Earlier this month, Apple Insider reported a web-crawling bot was found in Apple’s servers. This could be the start of a new search engine or it could be just a way to boost search options. One example of this is when OS X Yosemite Search Spotlight scours through desktop, web, Wikipedia, and maps.
It’s reported Microsoft Corporation (NASDAQ:MSFT)’s Bing and Yahoo! Inc. (NASDAQ:YHOO) are already in talks with Apple about becoming the main search engine for Mac and iOS devices. Right now it appears Microsoft has the upper hand because Bing is already used for Spotlight and Siri. But back in 2013, Yahoo was reportedly working to increase revenues and aim to become Apple’s default search.
Firefox drops Google
Firefox recently dropped Google as the default search engine and replaced it with Yahoo. Both moves could further inspire other companies to drop Google’s search engine from their websites or applications.
Apple has always switched up providers for programs. With the iOS 7 launched, Siri’s default engine was Bing. With iOS 8, Apple replaced Yahoo’s Weather with The Weather Channel. Apple even dropped Google Maps in favor of its own Maps. There is a strong possibility Apple could go with another search engine but it is just as likely it could launch its own search service. The latter could be a huge blow to rival Google as it remains one of the leading search engines around the world.
Yahoo! Inc. (NASDAQ:YHOO) poached a top sales executive from Amazon.com, Inc. (NASDAQ:AMZN). Today, the search company announced the appointment of Lisa Utzschneider as senior vice president of sales, Americas.
Yahoo CEO says Utzscheneider has unique strengths
According to Marissa Mayer, CEO of Yahoo! Inc. (NASDAQ:YHOO), Utzschneider has unique strengths in terms of identifying new opportunities to maximize the value of advertising in a rapidly expanding and evolving media landscape.
“Lisa has a demonstrated track record as a leader and as a business builder, focused on creating and expanding sales relationships as well as scaling technological innovation,” added Mayer.
Utzschneider will be responsible for the advertising business of the search company across the Americas. She will report directly to Mayer. All of the sales teams across North and South America will report to Utzschneider.
Commenting on her appointment, Utzschneider said, “I am thrilled to join Yahoo and to build on the proven assets the company has developed across the advertising space. I look forward to working with this team and with Yahoo’s technology platforms to deliver value to advertisers and to delight consumers with unique and personalized ads.”
Before joining Yahoo! Inc. (NASDAQ:YHOO), Utzschneider recently served as vice president of global advertising sales, Media Group at Amazon.com, Inc. (NASDAQ:AMZN). She led the product development and sales strategies for advertising solutions across the portfolio of the e-commerce giant.
Prior to her career at Amazon.com, Inc. (NASDAQ:AMZON), she worked at Microsoft Corporation (NASDAQ:MSFT). She spearheaded various advertising initiatives in product development, sales strategy and online industry standards during her ten years tenure at the software giant.
Other executive appointments
Yahoo! Inc. (NASDAQ:YHOO) also appointed Ned Brody to assume the newly position of senior vice president, advertising technology and strategy. He will focus on the deployment of advertising technologies and go to market strategies across the company’s ad portfolio.
Early this month, Yahoo! Inc. (NASDAQ:YHOO) hired Kevin Gentzel, the former chief revenue officer at Washington Post to lead its sales department.
Investors are bullish on Yahoo
Meanwhile, several investors including Jeff Smith of Starboard Value and John Burbank of Passport Capital are bullish on Yahoo! Inc. (NASDAQ:YHOO). Burbank said he is long on Yahoo and he believed that the shares of the company were undervalued.
The spending is part of a wider plan to take on Netflix, Inc. (NASDAQ:NFLX) and other online digital media services, but has led to criticism from investors due to the fact that the company remains in the red.
Audible, the audiobooks service that Amazon.com, Inc. (NASDAQ:AMZN) bought for $300 million in 2008, will pick up Rooftop Media for an undisclosed sum. Donald Katz, Audible founder and chief executive, said that the company was attracted by Rooftop’s strong content and varied pool of talent.
What is Rooftop?
Rooftop makes recordings of comedy shows across the country and then licenses the digital rights to thousands of hours of content, which is either broadcast live or later on demand. Up to now its media partners have included Apple Inc. (NASDAQ:AAPL) and Yahoo! Inc. (NASDAQ:YHOO), as well as streaming services like Sirius XM Holdings Inc. (NASDAQ:SIRI), Spotify and Pandora Media Inc (NYSE:P).
As a consequence of this latest deal its content will be included on Audible, which Rooftop Chief Executive Officer Will Rogers claims will vastly expand his company’s audience.
Analysts expect Amazon to continue its strategy of acquiring digital content. In an attempt to branch out from its online retail roots, the company has invested in content production as well as a line of tablets, smartphones and set-top-boxes.
For years investors have forgiven the company’s lack of profits because of its huge growth in revenue. However this growth has recently stalled, with the company missing revenue and income expectations last week. It also projected a 7-18% rise in holiday-quarter sales, which left investors disappointed.
CEO Jeff Bezos has designs on becoming a media and technology behemoth, but this vision has put him at loggerheads with investors concerned by the state of company accounts.
Despite share prices being up 0.6% on Monday, it remains down around a third from the beginning of the year. It remains to be seen whether investors will give Bezos enough time to see if his strategy bears fruit.
An October 22nd research report from Susquehanna Financial Group highlights tech titan Yahoo! Inc. (NASDAQ:YHOO), suggesting that the firm is continuing to show incremental improvement in operations. Susquehanna analyst Brain Nowak and colleagues reiterate their Neutral rating on the stock, but raise their price target from $41 to $43.
Highlights of Yahoo third quarter earnings
The Susquehanna report noted that Yahoo had a strong quarter, reporting third quarter 2014 revenue (ex. TAC) 3% above their estimates and 4% above consensus analyst estimates. The display segment was modestly improved, down -6% YoY and surpassing Susq estimates by 3.5%. The search growth number of 5.5% was 2% below Susquehanna’s expectations. Of note, the biggest driver of the revenue surprise was “Other”. The company also surpassed EBITDA and EPS expectations by 19% and 53%, respectively (largely because of higher equity income).
Furthermore, fourth quarter guidance was also higher than expected, with net revenue projected at $1.14 billion-$1.18 billion (1.5% above Susq’s previous estimate at the midpoint). The top end of fourth quarter EBITDA guidance of $340 million to $380 million was in-line with Nowak et al’s previous expectations ($381 million).
More capital returns via stock buybacks
Yahoo! Inc. (NASDAQ:YHOO) also noted that it will continue its capital returns plan, and intends to return at least half (around $3 billion) of its Alibaba Group Holding Ltd (NYSE:BABA) IPO proceeds to shareholders. Of note, the company entered into a $1.1bn accelerated share repurchase which, together with other third quarter and projected fourth quarter buybacks, should lead to YHOO buying back at least 49mn shares in the second half of the year. Nowak and colleagues say that shareholders should expect more buyback capital returns in 2015, and model $2.8 billion of buybacks next year (approx. 73mn shares).
More acquisitions likely
Moreover, Yahoo also reaffirmed its M&A strategy during the third quarter earnings call, and intimated they will continue to look at all types of deals (including in the video ad platform sector to grow Yahoo! Ads Manager). Also of note, the current $12.7 billion in tax efficiency will give Yahoo significant room for deals, and management’s tone doesn’t seem to hint that the firm’s acquisition spree is going to end any time soon.
The stock markets in the United States declined as equities of energy companies fall due to slumping oil prices.
The oil price dropped around 20% to 25% from its highest level at $105 per barrel in June. The current price of crude oil (WTI) is $80.59/bbl. The oil prices are declining because of the changes in the demand and supply worldwide.
The United States has become a major energy producer because of the booming shale industry. Over the past five years, the U.S. increased its domestic oil and gas supply by 50%. The country is now the largest producer of natural gas.
The declining oil prices are pressuring the drillers in the United States. Data from Baker Hughes showed that the number of active rigs drilling for oil and gas fell over the past two months. As of October 17, 19 oil rigs stopped operating.
James Williams, president of WTRG Economics said, “Unless there’s a significant reversal in oil prices, we’re going to see continued declines in the rig count, especially those drilling for oil.”
Yesterday, Daniel Loeb of Third Point LLC emphasized that the United States remained the best place to invest. According to him, the “markets will resume an overall upward trajectory in the U.S. through year-end.
On the other hand, Laurence Fink, CEO of BlackRock, Inc. (NYSE:BLK) stated the selloff in the U.S. stock markets last week “weeded out excesses.” According to him, “This is just a market correction, and we need market corrections to clean the market out.” He added that he would be buying equities as a long-term investor.
In a telephone interview with Bloomberg, Randy Bateman, chief investment officer at Huntington Asset Advisors commented, “It might be kind of a slow reflection day today. We’ll probably just have a little digestion from yesterday. Right now, we’re looking at earnings being the driving force of this market. There will be winners and losers.”
- Dow Jones Industrial Average (DJIA) – 16,461.32 (-0.92%)
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- EURO STOXX 50 Price EUR- 3,008.53 (+0.57%)
- FTSE 100 Index- 6,399.73 (+0.43%)
- Deutsche Borse AG German Stock Index DAX- 8,940.14 (+0.60%)
- Nikkei 225- 15,195.77 (+2.64%)
- Hong Kong Hang Seng Index- 23,403.97 (+1.37%)
- Shanghai Shenzhen CSI 300 Index- 2,418.64 (-0.61%)
Stocks in Focus
The stock price of Yahoo! Inc. (NASDAQ:YHOO) rose 4.53% to $42 per share after reporting better than expected financial results for the third quarter. The company posted earnings or $0.52 per share on $1.09 billion in revenue compared with consensus estimate of $0.32 in earnings per share on $1.05 billion in revenue.
Broadcom Corporation (NASDAQ:BRCM) gained 5.46% to $39.37 per share after reporting earnings that beat the consensus estimate of Wall Street analysts for the third quarter. The company generated $0.91 in earnings per share compared with the $0.84 per share consensus estimate. Its revenue was $2.26 billion.
The shares of Six Flags Entertainment Corp (NYSE:SIX) surged 12.75% to $38.90 per share after reporting better than expected financial performance for the third quarter. The company said its adjusted EBITDA rose 8% to $291 million and its revenue climbed 7% to $542 million.
Yahoo! Inc. (NASDAQ:YHOO) is scheduled to deliver its earnings results for the third quarter today, October 21. Analysts at Cantor Fitzgerald Equity Research expected the company to deliver muted financial performance for the quarter with “operating results virtually in line with expectations/guidance.”
Earnings estimate for Yahoo!
Cantor Fitzgerald analyst Youssef Squali and his colleagues estimated that Yahoo! Inc. (NASDAQ:YHOO) will be able to achieve $259.7 million in EBITDA and $1,054.2 million in net revenue for the third quarter. Their expectations were in line with the consensus estimate of $249.5 million in EBITDA and $1,047.5 million in revenue based on data compiled by Fact Set.
On GAAP basis, Yahoo! Inc. (NASDAQ:YHOO) was expected to deliver $0.22 in earnings per share compared with the consensus estimate of $0.23 in earnings per share.
Investors to focus on Yahoo’s display growth
In a note to investors, Squali and his fellow analysts emphasized that investors will focus their attention on the display growth of Yahoo! Inc. (NASDAQ:YHOO). The analysts noted that the company is still a share loser when it comes to display and search.
Squali and his team estimated that its display revenue declined 6.2% (ex-TAC) to $395.3 million year-over-year. On the other hand, its search revenue was expected to increase 5.7% (ex-TAC) to $450.2 million year-over-year. “These rates pale in comparison to mid-teens industry growth, and display in particular has been challenged,” according to
Meaningful monetization and revenue growth remained elusive
Squali and his fellow analysts observed significant improvements in the culture, products and user engagement at Yahoo! Inc. (NASDAQ:YHOO). The analysts said the company’s first glimpse of growth happened in the first quarter of this year, but they noted a “meaningful pick-up of monetization and revenue growth remained elusive.”
The analysts estimated that the overall revenue of Yahoo! Inc. (NASDAQ:YHOO) for the fiscal 2015 would decline by 0.9% year-over-year.
They emphasized that the management of the company needs to prove that it can grow at rate closer to industry levels for its stock to work on a longer term.
The analysts said Yahoo Japan Corporation (TYO:4589) and Alibaba Group Holding Ltd (NYSE:BABA) still supports the sum-of-the-parts valuation of Yahoo! Inc (NASDAQ:YHOO). Yahoo Japan and Alibaba contributes $33 per share to its valuation (including the ~6.4 for BABA IPO net proceeds). Its Asian assets plus all cash/short-term investments contribute $37 per share.
Squali and his team maintained their Buy rating for Yahoo! Inc. (NASDAQ:YHOO) with a price target of $43 per share.
Susquehanna Financial Group, a leading options trader, is recommending a “stub” spread trade in Yahoo! Inc. (NASDAQ:YHOO) options to play “tax optoinality” on a nearly $16 billion gain in the stock price of Alibaba Group Holding Ltd (NYSE:BABA), which Yahoo owned.
The options firm, historically known for its options market making skills, is recommending buying the 41 call vs. selling the 46 call in a long bull spread as a way to minimize cost/volatility exposure, while also taking advantage of the low skew in the stock options.
Tax advantages for Yahoo after a merger with AOL
Yahoo! Inc. (NASDAQ:YHOO) can potentially avoid a $16 billion tax bill if it merges with rival AOL, Inc. (NYSE:AOL), activist investor Starboard Value claims. Several weeks ago Starboard announced Friday it had established a position in Yahoo and then published a letter with a list of several proposals to improve the stock price.
Some of Starboard’s proposals were clear, such as slashing costs in the troubled display adverting division and halting the company’s much maligned acquisition strategy. Starboard estimated the Yahoo acquisition strategy cost the company over $1 billion in the last two years and the display advertising division cost several hundred million dollars, CNBC reported.
Starboard is calling on Yahoo to merge with AOL, Inc. (NYSE:AOL) because the combination could result in the elimination of redundancy in their advertising businesses. AOL could use a method it has to drive rapid advertising revenue growth and has suggested there is opportunity to “turn Yahoo around if the businesses are combined,” the report said.
Yahoo’s low spreads a low-cost way to leverage investment capital
For investors who want to gain exposure to potential tax optionality but don’t want to own the stock long term, Susquehanna likes Yahoo! Inc. (NASDAQ:YHOO) call spreads as a low-cost way to leverage investment capital. The report does note that YHOO volatility did experience a significant decrease in the wake of the Alibaba IPO, volatility continues to hold in the 50th percentile. Meanwhile, the report notes skew remains on the low side, currently in the 27th percentile, with skew still toward the calls.
Volatility skew is the difference in implied volatility between out of the money and near the money options and is used to determine the underlying value of a trade.
At yesterday’s closing stock price of $40.75, the near the money call spread could be purchased in the market for $1.71. A purchase of the spread at this price would set up an expiration breakeven of $43.71, with a maximum win of $3.29 ($5 spread less the premium paid) achieved at or above $46. Risk on the downside would be limited to the cost of the spread, the report noted.
In an interview with Bloomberg‘s Emily Chang and Cory Johnson, GGV Capital Managing Partner and person responsible for connecting Jack Ma to Jerry Yang leading to the landmark transaction between Yahoo! Inc. (NASDAQ:YHOO) and Alibaba Group Holding Ltd (NYSE:BABA), Hans Tung said Alibaba is a ‘very focused’ company and expects them to focus more on emerging areas such a digital goods as in gaming or in financial services, logistics, search or cross-border commerce.
Will Alibaba Use Proceeds From IPO to Buy Yahoo?
Early Alibaba Investor on how the partnership came to be between Alibaba and Yahoo!:
“It’s a great question. GGV become investor in Alibaba back in 2003, and in 2005 played a role in connecting Jack and Jerry. As a matter of fact, I’m on the board of (inaudible), which was a very – has been a very active organization facilitating cross-border activities between US and China. And (inaudible) and GGV had a CEO summit back in 2005 and then that’s when Jack and Jerry met up with each other and had a long conversation, heart to heart talks, and decided that it makes sense for the two to team up. And one plus one equals bigger than two in China. And back then the valuation for Alibaba was $5 billion for the entire company. In fact, Jack took a lower offer in order to have control of the company back in 2005. And today we’re looking at possibly a $165 billion market cap company. That’s amazing growth in the past nine years.”
Early Alibaba Investor on how Jack Ma and Jerry Yang initially worked together:
“That’s another good question. Those two had a personality that had – they have common grounds. They also are complementary to each other. Jack and Jerry both are very strategic, and Jack has the cunningness to think ahead and map ways to get there. And Jerry obviously sees the value of what Jack is doing and as a product manager knows that for a market like China which is very localized, you need to have local stores managing it and coming up with services that tailor to the needs of local consumers. I don’t think Jerry gets enough credit for making that deal. In the history of any US company investing in China or doing operations in China, Yahoo’s investment in Alibaba has by far been the most successful.”
Early Alibaba Investor on whether Alibaba is doing business differently than Yahoo! or Google:
“I think Yahoo and Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOGL) and other companies in the US are quite focused in areas they’re in, but in China because it’s such a – such a big land grab opportunity, every company seems to want to do everything. So for Jack it’s not just going to be enough for ecommerce, but also social networking, also financial services, and also search. And so the ambition of the Chinese internet giants has been more in the cases that I have seen. And their ambition is not going to be limited only to China. I think over the next 10 years globalization will be a huge thing coming out of the Chinese internet giants.”
Early Alibaba Investor on what he expects Jack Ma to do with the money that they make on this IPO:
“I think Alibaba with that kind of cash on its balance sheet has a plethora of choices. You look at what they’ve done the last 18 months. It’s been quite interesting. Most people will argue that it’s not focused. I disagree. I think they have a plan and they realize that Alibaba could be much bigger outside of China than it is inside China. That’s hard to imagine, but right now in China Alibaba’s primarily known as an ecommerce company with financial services upside. But outside of China, it could be any combination of by doing – by doing search or (inaudible) social networking and a variety of other businesses. You look at the rest of the world. Only US and China have the complete internet ecosystem that has the ability to expand beyond the home boundaries to tackle other opportunities outside of these markets.”
Early Alibaba Investor on whether Alibaba will buy Yahoo!:
“I think Ali will have its choices of things to do and it will be focusing more on emerging areas, whether that’s in digital goods as in gaming or whether it’s in financial services or logistics or cross-border commerce or even search. I think they have a lot of choices ahead.”
Early Alibaba Investor on whether Alibaba is a focused company:
“I think they’re very strategic. With the cash they have, they can afford to make some mistakes. My experience of being in VC is you – you should worry less about your losses and focus on the – the possible up gains you can get. When I went to China in 2005, Tencent was a $3 billion or $4 billion market cap company. Now it’s $180 billion. Baidu was a $4 billion or $5 billion company. Now it’s $160 billion, $170 billion. The kind of growth that you’ve seen in China is just the beginning. I think the rest of the world over the next 10 years will present even bigger growth opportunities. So Alibaba can afford to make some mistakes.”
“I think for an American investor, it’s more comforting to know exactly what a company is going to do. But one thing I learned being in the venture business is that no matter how smart investors are, it really comes down to the management to make things happen. They’re the one that can make magic. So it’s – you buy stock in Alibaba tomorrow. You’re betting on that team, the partnership that they have to be able to continue to innovate over the next 10 years. And I think they are capable of doing that.”
According to a September 12th article in the New York Times, orders for the impending Alibaba IPO are coming in so quickly that the banks leading the IPO expect to close their order books early. Knowledgeable sources also say there is a possibility the principals may decide to raise the price range for the stock sale, which is already slated to bring in $21.1 billion.
Details on Alibaba IPO
As confirmed by multiple sources including Bloomberg, underwriters for the Alibaba IPO ordered their sales staffs on Friday that they would close all orders for the offering by this coming Wednesday afternoon. Moreover, the sources hinted that that Alibaba was also likely to raise the price range for the stock sale apst the curret $60 to $66.
The sources indicated would stop accepting orders from U.S. investors Tuesday at 4 p.m. Asian and European money managers would have until the close of their business day to submit their orders.
That said, it was also made clear that investors who are interested but have not met with the Alibaba executives by the new deadline will be given some additional time to place their orders.
No sensitivity to price
Of note, the underwriters also commented that they had received many orders with little to no “no sensitivity” to the current price range of $60 to $66 a share for the IPO. Analysts point out that with demand this great for shares, it’s likely the investment banks will go ahead and pull the trigger and increase the price range of what was already expected to be one of the largest IPOs in history.
The high level of interest among potential investors has been clear for some time, but the degree of public excitement became even more obvious when the company kicked off its global roadshow early this week. Sources say over 800 money managers came to the the Waldorf-Astoria in Midtown Manhattan for a lunchtime presentation hosted by Alibaba’s executive chairman and co-founder, Jack Ma, with a number of latecomers being told there was no room for them.