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Yahoo! Waits as Investors Wonder if Alibaba Will Go Public Next Week

Stocks in this article: YHOO SFTBY

NEW YORK (TheStreet) -- The Alibaba watch continues. Once it was thought the Chinese Internet giant would file as soon as this past Monday for its initial public offering. Late Sunday, more rumors surfaced that the decision had been made to hold off on the filing for another week.

I think it's highly likely we will see a filing after the close of trading this coming Monday for Alibaba.

It's sure to draw a lot of attention and be a boost to Yahoo!'s (YHOO) and SoftBank's (SFTBY) stocks after it appears.

The past few days there have been more rumors about how Jack Ma and Joe Tsai have set up charitable trusts and agency records showing that Alibaba may be valuing itself at something like $153 billion. You shouldn't take that number as gospel. The IPO will only price after the roadshow and long discussions between underwriters and institutional investors. All that is likely still months away. The Wall Street Journal reported Thursday a listing would probably come no earlier than the late summer.

So what does this mean for Yahoo!?

At a valuation of $160 billion, Yahoo! will receive $16 billion gross from the IPO as it will sell down its 24% stake to 14%. This would equal something like $11 billion net of possible taxes it would have to pay.

Some are hopeful there will be a way for Yahoo! to save on these taxes. Even a partial savings on $5 billion would, of course, be significant. To this point, though, Yahoo! CFO, Ken Goldman has really had nothing to say on the matter other than the company continues to have its best and brightest working on the matter.

Even if fully taxed, though, $11 billion -- on top of the excess of $4 billion it has -- will be a significant sum.

Most, including me, are expecting Yahoo! will spend some of this amount on stock buybacks and some on acquisitions, keeping a residual safety amount to run the business.

That means Yahoo! could have up to $12 billion to spend. Let's say it is split half and half. Spending $6 billion on buybacks at, say, $36/share, would equal about 17% of the shares outstanding. That's sizable.

It will be interesting to see what Yahoo! spends money on in acquisitions. If it does $6 billion, that's a lot of money. If it buys the equivalent of six Tumblrs, the market will not be hungry and that $6 billion in cash will quickly disappear from the valuation of the company because Wall Street will mark it down to zero.

The next six months will be critical for CEO Marissa Mayer to demonstrate to the world that she's got a clear vision of where she is taking the company.

At the time of publication the author is long YHOO.

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

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