1. The agreement clearly states “Under the terms of the agreement with Yahoo!, Alibaba Group has the right to repurchase one-half of Yahoo!’s remaining stake upon a qualifying initial public offering in the future.” So the question is, would Alibaba rather repurchase this half of the remaining stake (let’s call it 10% of Alibaba) when Alibaba is valued at $60 billion or $80 billion? Although Alibaba would potentially be richer with a larger valuation, I assume they’d prefer to buy back that 10% stake at a lower valuation assuming that it will quickly appreciate in the coming years, as it has in recent years.
2. To end the IP Royalty Stream (the TIPLA clause in the agreement). The May agreement states: “Alibaba will make an upfront lump sum royalty payment of US$550 million to Yahoo! and continuing royalty payments for up to four years.” The key words there are “up to.” The sooner Alibaba buys out Yahoo, the sooner they can cease this IP royalty stream to them (or at least reduce it).
3. Pay down debt which they took on to buy back Yahoo’s first tranche.
4. Although Yahoo can keep its last 10% tranche in perpetuity, the sooner Alibaba IPOs, the sooner it would have more resources to potentially offer to buy back this last tranche in a block trade, thereby maximizing the rapid expected growth of Alibaba’s share value to management and employees.
5. The last round of investors in Alibaba might want to take advantage of the monetization opportunity from the IPO even, just as Facebook (FB) investors did.
6. Alibaba’s ambitions to expand outside China. Their investments in Auctiva and Vendio are viewed as unsuccessful despite both having significant installed user bases. Having the resources to launch a US-focused platform is something that should produce results as well as compete with eBay (EBAY) in their own backyard.
7. Talent retention.
8. Increasing costs in China for everything – salaries, taxes, equipment, etc. China is no longer cheap in the tier 1 and 2 cities.
9. Increased competition locally especially from Tencent, 360Buy, and Suning.
10. Continued strategic investments/acquisitions. For example, there have been on again off again rumors in the last month that Alibaba was going to make a strategic investment in Sina (SINA) or even buy them outright. If I was Jack Ma, I’d rather make that investment post-IPO rather than before, rather than give Sina management a lot of pre-IPO stock and see them hit the lottery later once Alibaba IPOs.
11. Finally, sooner than later would help ensure Alibaba doesn’t suffer from sky-high expectations. Think about Google‘s IPO vs. Facebook’s as an example.
The entire article can be read at Forbes.