Top Trading Ideas: LONG YAHOO - the Alibaba call / (possible hedge with a short in Softbank)
We recommend going long again Yahoo on the upcoming Alibaba IPO. The market consensus for Alibaba's IPO value is around $150bn with some estimates going as high as $200bn. This IPO will undoubtably be the most successful IPO of the year, and certainly one of the best of all times. Yahoo owns 24% of Alibaba. We had made the case for Yahoo back in October 2012 when the shares were trading at around $16.00 and recommended to exit in May 2013 at around $26.00. Since then, the valuation of Alibaba has exploded further, resulting in a still negative Yahoo stub even on the most conservative estimates for Alibaba. Yahoo shares will most likely re-rate up to the IPO date. We calculate a discount to NAV of 33 to 45%, which is huge by US market standards. We note that the Alibaba stake will account for 100% of Yahoo's NAV in the case of a $150bn valuation. In other words, anyone wanting to subscribe to the Alibaba IPO will be "fully allocated" by just buying Yahoo. FULL REPORT ATTACHED