China-based e-commerce company Alibaba filed for its long awaited initial public offering yesterday with internet company Yahoo set to reap a large profit from its investment.
Alibaba’s initial filing states that it is targeting $1bn from the IPO, but the ceiling is certain to rise to a figure nearer the $15bn touted in reports earlier this year.
Yahoo is currently Alibaba’s second largest shareholder, according to the filing, holding about 524 million shares. Yahoo acquired a 40% stake in the company for $1bn in 2005, and though it has since been reduced to 22.6% after Alibaba bought back 523 million shares in 2012 for almost $7.1bn.
Yahoo has also benefitted financially from a technology and intellectual property licensing agreement with Alibaba, which resulted in a one-off $550m payment from Alibaba in 2012.
As part of that deal, Yahoo agreed to sell up to 208 million shares in any IPO, which would equate to almost 9% of Alibaba’s current share capital, though it will also be issuing shares in the IPO.
Alibaba’s largest shareholder is Japan-based Softbank, which holds almost 798 million shares, representing a 34.4% stake. Softbank has stated that it will not sell any of its shares in the offering.
Softbank led a group of investors that provided $20m to Alibaba in 2000, and has since made a $50m investment in a predecessor of Alibaba subsidiary Taobao Marketplace in 2003, a $30m convertible note purchase the same year, the notes since being converted to stock, and a subsequent $180m convertible bond purchase.
Alibaba recorded a net profit of more than $3.1bn in 2013 from revenues totalling nearly $5.7bn, according to the filing. It will use the proceeds for general corporate purposes.
Credit Suisse Securities (USA), Deutsche Bank Securities, Goldman Sachs, J.P. Morgan Securities, Morgan Stanley and Citigroup Global Markets are serving as the IPO’s joint bookrunners.