Valuing Yahoo's stake in Alibaba

MarketWatch asks an interesting question with no easy answer. How much is Yahoo's stake in the Alibaba Group worth?

The easiest piece is of the puzzle is Alibaba.com. Yahoo still holds a 29% stake in Alibaba.com which is worth about US$2.9 billion (at a recent share price of HK$15.30).

The other businesses are much harder to value. Alipay reportedly holds a 75% market share in China, with 300 million registered users - compared to Paypal's 184 million accounts. Alipay has a reported daily transaction value of US$176 million.

Taobao has 190 million registered users (vs. eBay's 90 million active users) and goods worth US$29 billion traded on the platform in 2009. Ebay recorded US$60 billion in goods sold in 2009. Taobao's revenues are not known, but thought to be in the US$300 million range.

Citigroup analyst, Mark Mahaney estimates that Yahoo's stake could be worth US$13 billion in off-balance sheet value. Yahoo is currently valued at about US$21.5 billion. One way we could find out the value of that 40% is through a sale. At a recent shareholder meeting Alibaba's management said that they were ready and willing to buy back Yahoo's stake, but don't expect to see that announcement anytime soon. Yahoo will likely hold on for as long as they can as Alibaba's growth prospects are far better than theirs.