Yahoo! Inc. (YHOO)’s stake in Alibaba Group Holding Ltd. (BABA) has been the biggest driver of its shares for several quarters. For Chief Executive Officer Marissa Mayer, that’s likely to continue after the Chinese company’s initial public offering.
While Yahoo was slated to sell more than 121 million shares in the IPO, for now it’s hanging on to more than 70 percent of its stake, keeping its rank as one of Alibaba’s top holders. In July, Mayer cut the number of shares Yahoo planned to sell in the offering, and lockup rules limit further sales for a year.
Mayer, who has been trying to revive growth at the Web portal for more than two years, has depended on Alibaba to attract investors eager to own a piece of the e-commerce giant before the IPO. Until Yahoo says when and how it intends to unload the rest of its shares, the Sunnyvale, California-based company may keep benefiting from that stake even as its main business founders, investors and analysts say.
“It’s given her and the executive team just a lot more flexibility and options and time,” said Scott Kessler, an analyst at S&P Capital IQ. “There’s still a lot of work to be done.”
Some investors predict Yahoo’s stock will rally this year as holders continue to see it as a way to indirectly own Alibaba shares. According to bets by buyers of structured products, such as call warrants and knock-out certificates, shares of Yahoo may rise 65 percent by the end of the year.
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