This will probably be one of the biggest IPO (Initial Public Offerings) of all time. The stock could double right after the opening for trading, but unfortunately, those shares will be impossible to acquire prior to the offering.
So, what are you gonna do, if you want to get in on the Alibaba IPO? You can get in by walking in the backdoor into this offering. I think the best thing is to invest in Alibaba`s biggest shareholders like Softbank or Yahoo.
They own 37% and 24%. Because of the stake they both have in Alibaba, they are both up 76% (Yahoo) and 114% (Softbank). Last year have been good for both of them. Softbank`s outperformance of Yahoo can be attributed to its larger share of Alibaba.
Yahoo`s stake is worth $31 billion and that is about 80% of its market cap. Softbank`s market cap is $99 billion and its investment in Alibaba could be worth about $80 billion. Softbank paid $20 million for its investment in 2000. Now it is about $4 billion, and that is a good investment.
Softbank is probably a better investment than Yahoo because of its Alibaba holdings which is a smaller portion of its market cap. If Alibaba`s shares doubles the first day, the sum of Softbank`s shares will be worth about $150 billion, and that is above 50% higher than its market cap today.
You can also buy SPDR S&P International Telecommunications Sector ETF (IST), if you belive Softbank is a better investment than Yahoo. Softbank is the second largest weighting at 9,42% in this ETF mutual fund.
If you thing Yahoo is a better bet, you can buy First Trust Dow Jones Internet Index Fund (FDN) which have a weighting at 4,12%. Other investment opportunities to consider is Baron International Growth Fund (BIGFX) and American Funds New Economy Fund (ANEFX).
The last funds mentioned does not have a huge stake in Alibaba. American Funds New Economy are benefiting from tech and innovation, but their weighting in Softbank is just 1,42% and only 0,48% in Yahoo.
You can also consider Renaissance IPO ETF (IPO) which adds companies on the fifth day of trading and sells them about two years later. I think Alibaba will be added, but this will be a long-term investment and you need to wait before you jump in.
Krane Shares CSI China Internet Fund (KWEB) started its business in July 2013. They will start to buy after day 11 of trading. You have to remember that none of these investments are perfect. It`s risky to buy IPO stocks and I have never done that.
All this is just a scenario and I say the stock can double the first day, just to make an example. Alibaba`s decision to list in the U.S was a blow to the Hong Kong Stock Exchange. Former English schoolteacher and lead founder Jack Ma owns 8,9% of Alibaba, and he will be one of the richest in China.
Reports today:
08:30 a.m EST Prelim Nonfarm Productivity q/q
08:30 a.m EST Prelim Unit Labor Costs q/q
10:00 a.m EST Fed Chair Yellen Testifies
10:30 a.m EST Crude Oil Inventories
01:01 a.m EST 10-Y Bond Auction
03:00 a.m EST Consumer Credit m/m
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