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Why No One Wants This Alibaba IPO More Than Yahoo!

Stocks in this article: YHOO EBAY GOOG SFTBF FB

Then there is founder and CEO Jack Ma. Ma has been able to successfully navigate Alibaba through the difficult Chinese Internet regulatory environment. He is a popular public speaker with his fluency in English, which helps him greatly dealing in the U.S.

Analysts have given varying value estimates for Alibaba but the consensus is $153 billion. This makes Alibaba nearly twice as big as eBay.

What does the IPO really mean to Yahoo!! and Japan's Softbank (OTC: SFTBF), which owns 37% of Alibaba?

Yahoo!'s stake in Alibaba is valued at more than 95% of Yahoo!'s current market cap while Softbank's stake is 59% of its current market cap. Yahoo!'s shares could rally on the hype surrounding Alibaba's IPO but it has to sell 10% of that stake once the IPO is completed.

However, the equity sale could give a significant boost to Yahoo!'s cash reserves. If Alibaba is valued at $153 billion, then Yahoo! could get $15.3 billion from the sale.

Yahoo! has been struggling with increasing its revenue. The company could use the massive cash inflow from Alibaba's equity sale to expand in other areas in its hunt for top-line growth. Like other technology companies such as Facebook (FB), Alibaba and Rakuten, which just bought messaging app Viber, Yahoo! could also go after a company with a hot messaging app.

Or Yahoo! could use the cash to increase its non-acquisition-related capital expenditures, or return the cash to shareholders.

But first the dust must settle after the IPO, when Yahoo!'s shares could go either way.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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