The Alibaba.com IPO is set to price imminently with trading scheduled to begin on November 6th. One beneficiary of the mounting investor enthusiasm for the company is Yahoo, (NSDQ: YHOO) which holds a 39 percent stake in its parent company Alibaba Group, and is set to invest another $100 million directly into Alibaba.com. A research note from Rob Sanderson, an analyst at American Technology Research, attempts to put a value on Alibaba’s other assets, most notably Taobao, an eBay-like business and AliPay, which is like PayPal. The basic theme of the report is that both of these units are in a similar spot to where eBay (NSDQ: EBAY) and PayPal were 6-7 years ago, while showing similar growth trajectory.
— Taobao: The site has done $2.1 billion in gross merchandise volume through the first half of ’07, which is about what it did in all of ’06. eBay did $2.6 billion 2000, then jumped to $7.3 billion in 2001. If Taobao GMV can reach $25-$30 billion in the next few years, the unit could be valued greater than $15 billion by the first half of 2010.
— AliPay The service is estimated to be doing $4.7 billion in annual transaction volume, 50 percent more than PayPal was in 2001. Assuming it could hit $35 billion in 5 years, this too could be a $10-$15 billion business by 2010.
Ultimately, depending on the market value of Alibaba.com and some of the group’s smaller assets, Yahoo’s stake in Alibaba Group could add more than $13 per share, in the next few years. Of course, it’s easy to count a number of ways this scenario could get derailed. For one thing, there’s no guarantee that Taobao or AliPay will prove to be as successful as their American counterparts. Also, part of the analysis rests on the current valuations for traded Chinese internet stocks; nobody knows where they’re headed in though. Then there are the larger political and economic factors. In the meantime, if investor appetite for Chinese internet companies continues as it has been, it wouldn’t be a surprise for more people to think of Yahoo as a backdoor to this market.