Investors in SoftBank Corp. are surely enjoying Alibaba Group Holding Ltd.’s progress toward an initial public offering.
SoftBank shares rose 3.7% early Thursday following news on Wednesday that the Chinese e-commerce giant now plans to list in New York after talks with the Hong Kong stock exchange ended.
That’s because SoftBank holds a 36.7% stake in Alibaba–making it the biggest shareholder–and the IPO is expected to value Alibaba at as much as $70 billion. That would make SoftBank’s stake worth around $25 billion, or equal to nearly a third of SoftBank’s current market cap. Not too shabby for a $20 million investment in 2000.
“The only real question [for SoftBank] is how much of the latent value is already priced into its own stock. With a price-to-earnings ratio of under 18 times, shares may yet see significant upside after Alibaba lists,” said Tachibana Securities market adviser Kenichi Hirano.
Yahoo Inc.YHOO +0.22% owns 24% of Alibaba and founder Jack Ma holds about 7%.
Alibaba wants a listing structure that would allow it to go public without forcing its partners, including Mr. Ma, other co-founders and long-term employees to relinquish the right to nominate the majority of the company’s board.
Led by billionaire founder Masayoshi Son, SoftBank invested in Alibaba when the Chinese company, which was founded in 1999, was still a startup.
SoftBank’s investment is paying off as it pushes into the U.S. market following its $21.6 billion acquisition of telecom carrier Sprint Corp., the biggest takeover deal in Japanese corporate history.