Alibaba Looks for Value With Delisting Plan 阿里巴巴计划退市以寻求价值

By newsdoug on February 10, 2012

Unappreciated Alibaba plans to delist The online world has been buzzing since yesterday when Alibaba.com (HKEx: 1688), the only listed unit of e-commerce giant Alibaba Group, suspended trading of its shares pending a major announcement. Many, myself included, were eagerly awaiting an announcement from the parent Alibaba Group, which has been negotiating a buyback of the 40 percent in itself held by Yahoo (Nasdaq: YHOO); but few were expecting anything from the publicly listed Alibaba.com, which is the struggling B2B arm of the larger company. Now foreign media are citing unnamed sources saying Alibaba Group wants to privatize Alibaba.com, undoubtedly because it feels the unit is not fully appreciated by investors and could potentially drag down the parent company’s valuation as it seeks to buy out the Yahoo stake. (English article) Some recent investors have been saying since last summer that Alibaba Group could be worth as much as $30 billion, which would mark a huge increase over its value in 2005 when Yahoo purchased 40 percent of the company for just $1 billion. But with Alibaba.com valued at less than $6 billion based on its price before the Thursday trading halt, that valuation for the entire group looks difficult to justify. After all, Alibaba.com is one of the group’s oldest assets and presumably one of its most profitable, even though its growth has slowed considerably over the last year after a scandal emerged that saw the company’s CEO resign. The parent company’s other major assets include its Taobao Mall, recently rebranded as Tianmao (previous post), and its Alipay e-payments system, along with its original Taobao B2C online auctions site. But even if each of those assets is worth as much as Alibaba.com, which seems unlikely, the company would still have difficulty justifying the $30 billion valuation. The publicly listed Alibaba.com just announced today that its board will meet on February 21 to review and release the company’s latest quarterly results, which will undoubtedly show more disappointing growth. At the same time, I would expect it to announce the privatization plan, offering perhaps a premium of up to 20 percent over Alibaba.com’s last closing price as it seeks to remove its embarassingly low valuation from the market. After that happens, look for the parent company to move quickly with the privatization process so that it can completely de-list the unit before announcing its long-awaited Yahoo buyout that will give the parent company a valuation more to its liking.

Bottom line: Alibaba Group aims to eliminate an embarassingly low valuation for its Alibaba.com unit through a privatization plan.

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