How to Make a quick 40% on Alibaba's Backdoor Play

CENTRAL DISTRICT, Hong Kong - Sept. 4, 2014 - PRLog -- 4^th September: The market for IPOs has been heating up in 2014; according to Christian Muhr, the US IPO market showed more activity than any other first quarter since 2000, says James Alexander; VP International Development & Research at Christian Muhr.

The number of IPOs in the first quarter—64—more than doubled the number in the first quarter of 2013. Those 64 companies raised $10.6 billion.

Now, I don’t typically recommend buying initial public offerings. The best IPOs are snatched up by institutional investors and not often available to individual investors. And the IPOs that are available to individual investors are typically merchandise that has been passed over by the pros.

Also, investors, by waiting until after an IPO trades, can oftentimes buy the stock at a price that is below the IPO price. That has been the case so far this year with some IPOs—especially those offered in the last month or so.

Still, I’m intrigued with the “back-door” IPO possibilities presented by Yahoo (YHOO) and its 24% ownership in Alibaba, an e-commerce powerhouse in China. To give you an idea of the size and reach of Alibaba, two Internet entities run by the company had transaction volume of more than $240 billion in 2013. In the company’s fourth quarter, revenue jumped a whopping 66%, and profits more than doubled to $1.35 billion.

Alibaba is scheduled to go public on the 9^th September 2014, listing on the NYSE under the ticker symbol BABA. The IPO will put a market value on the company. Some analysts say the firm is worth north of $150 billion. A high valuation at the IPO would be a boon for Yahoo shares, given its large stake in Alibaba. Indeed, a $150 billion valuation for Alibaba would translate to a pre-tax value of $36 billion on Yahoo’s investment. (Yahoo plans to sell some 12% of its stake at the IPO.)

When you consider the Alibaba stake, a 35% stake in Yahoo Japan, current cash and investments on Yahoo’s balance sheet of nearly $5 billion, and what appears to be an improving (albeit at a modest pace) core business at Yahoo, a share price north of $40 per share seems more appropriate for Yahoo stock. Yahoo’s current market capitalization is around $37 billion. I see, at least, 40% upside in Yahoo shares as a result of Alibaba imminent initial public offering.

For more information on this investment opportunity visit; www.christianmuhrhk.com or send an email to info@christianmuhrhk.com