Marissa Mayer Has An Opportunity To Put Yahoo On Par With Google And Facebook
Chinese e-commerce company Alibaba filed for a much anticipated IPO Tuesday and one investor has a big payday coming their way: Yahoo.
Jack Ma founded Alibaba in his apartment 15 years ago and it has grown into the largest e-commerce company in the world's most populous country, according to The Wall Street Journal. It has been doing especially well this past year.
"Revenue for nine months ending December 31, 2013, was $6.5 billion, up 57% year over year. Net income over that same period was $2.9 billion, up 305% year over year," according to Business Insider.
To put that in perspective, the combined transaction volume of Alibaba's Taobao e-commerce marketplace and another Alibaba-run shopping site called Tmall reached $240 billion last year. That's triple the size of eBay, and more than double the size of Amazon.com, according to The Wall Street Journal.
The $1 billion fundraising target for the IPO will likely be reached — it is really only a placeholder and will be changed to as much as $20 billion, according to Bloomberg. It will probably be the biggest tech IPO in history.
All of the above has been well covered but Bloomberg pointed out that Yahoo is going to be in a position to make big changes. The company is selling 208 million of it's Alibaba shares (40 percent of its stake) in the IPO which could bring in more than $10 billion, according to Bloomberg. That would more than double the amount of cash at hand for the company.
Yahoo CEO Marissa Mayer has been at the helm for nearly two years and there has been little change in terms of sales and profit. The company made a splash when it bought Tumblr last year for nearly $1 billion but the social blogging platform's traffic isn't growing.
The new capital from the Alibaba IPO enables Mayer to make some serious changes.
"She could return cash to shareholders through a buyback or dividend, or focus on expansion through acquisitions. Choosing wisely is critical, as the payout offers Mayer her best shot yet at narrowing the ever-widening gap between Yahoo and Web rivals Google Inc. (GOOG) and Facebook Inc." wrote Brian Womack at Bloomberg.
Colin Gillis, an analyst at BGC Partners, who has the equivalent of a hold rating on Yahoo, told Bloomberg that public companies like AOL are within the realm of possible acquisitions or Yahoo might choose to add to its collection of startups.
What Mayer chooses to do will not only be very meaningful to Yahoo but to her professionally.
He also said how Mayer manages the coming capital will "define how effective a manger she is."