Editorial: Yahoo! Alibaba

May 10 2014, 04:08 IST
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SummaryThe Alibaba IPO could mean a filip for Yahoo!’s turnaround

There is feverish excitement over Alibaba, the Chinese e-tailing giant, being expected to raise almost $15 billion from its US IPO, on its way to a market cap of $152 billion, as per an analysts’ survey by Reuters. Alibaba handled about $248 billion in transactions in 2013—that’s more than Amazon’s and eBay’s combined figures for that year—made by 231 million active users in its three main Chinese online marketplaces. All of this, of course, has fuelled what could be one of the largest IPOs in history. However, it is Yahoo! that stands to walk away with windfall gains—in excess of $10 billion—from the offering, selling 208 million shares, or 40% of its 24% holding in Alibaba. This would mean a much-needed reprieve for Yahoo!—the company has been working on a turnaround under CEO Marissa Mayer for nearly 2 years now, but revenues remain elusive. Yahoo! could use the money for expansion which has for too long now seemed to be in the works, given its loose links with Yelp and Pinterest.

Though the Alibaba story isn’t entirely without blights—questions over cross-holdings by chairman Jack Ma are cropping up with greater vehemence—the big takeaway from this has to be just how poised e-tail is to eat into organised brick-and-mortar retail’s share. And instead of obsessing over whether FDI in organised retail would break the backs of the mom-and-pop stores, India would do a lot better to get it right with policy for e-tail. If one Alibaba IPO can possibly benefit a Yahoo! so much, then shouldn’t India have the right investment atmosphere for e-tail, which analysts say is expected to boom in the country in the next few years?

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