Just How Big Will Alibaba Be?

NEW YORK ( TheStreet) -- Alibaba's IPO roadshow kicked off Monday with a bang.

There were huge crowds in attendance at the Waldorf Astoria hotel in New York to hear the pitch and most came away from the meetings raving about the scale and scope of Alibaba's e-commerce businesses.

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The excitement of investors spilled out into comments they made to members of the media afterward in interviews.

It was also reflected in Yahoo's (YHOO) stock price Monday, which jumped almost 6% on about five times the average daily volume. That's one of the biggest percentage moves up the stock has had during the past three years. Yahoo owns a 22.4% stake in Alibaba, a Chinese Internet company that is scheduled to go public in the U.S. next week.

Why are so many people getting excited now about Alibaba? Hasn't the Alibaba story been known for a while and shouldn't it be priced into Yahoo's stock already?

I think there are many reasons why Alibaba's story is attracting attention as its roadshow kicks off:

  • The scale of Alibaba's success in China is huge. At any given time, 60% of the packages being delivered in China are the result of an Alibaba property-related e-commerce transaction. Its Taobao consumer-to-consumer Web site has close to 100% market share in China.
  • Even though all the information about Alibaba has been disclosed in its F-1 filing, the reality is that lots of investors haven't read it and wait to hear it from the horse's mouth.
  • This company is still growing, and we are in an environment where many managers are seeking a large-cap stock that's still growing decently. They have that in Alibaba.
  • The potential for international growth is enticing.
  • People are expecting that Alibaba's pricing is going up. When Twitter (TWTR) started its roadshow, the initial price talk by bankers was in the low teens. By the time it priced, the stock went up to $26. It opened in the $40s and never really looked back. In the case of Alibaba, the initial price talk is between $60 to $66. I suspect it's going to price at $72 and close its first day at $90.

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