The Alibaba IPO is officially coming to the United States in 2014, and the deal is expected to raise as much as $15 billion for China's largest e-commerce company.
A Reuters report in February polled eight analysts who estimated that Alibaba could reach a valuation of $140 billion.
Naturally, investors want in on the Alibaba IPO, which is likely to be one of the largest IPOs in U.S. history. Those who are able to get their hands on shares of Alibaba before it goes public stand to make quite a profit.
But no one will be profiting quite like this company...
How Yahoo (Nasdaq: YHOO) Will Cash In on Alibaba IPO
In an investment that looks like an absolute steal now, Yahoo paid $1 billion for a 40% stake in Alibaba back in 2005.
Yahoo has been trimming its stake in Alibaba since that acquisition. The biggest sale happened in 2012 when it sold 20% of its shares back to the Chinese company. In that deal, Yahoo pocketed $7.1 billion.
As Alibaba's valuation continues to creep higher ahead of its IPO, that $7.1 billion sell-off in 2012 looks like a drop in the bucket compared to how much more Yahoo can make in 2014...
When Alibaba finally makes its public debut, Yahoo will be required to sell almost half of its stake in the company, per a prior agreement. If Alibaba does in fact meet the $140 billion valuation like many analysts expect, Yahoo is looking at cashing in almost $17 billion on 12% of its Alibaba shares.
From there, Yahoo investors will be looking for the company to pull off major acquisitions, possibly pay a one-time dividend, or increase in the company's share buyback program.
While the payoff from the Alibaba IPO will provide a short-term bump for YHOO investors, what Yahoo does following the mega-deal will be important to watch...