According to the NY Times, The Alibaba Group is close to securing an $8 billion funding round, valuing the company at an impressive $43 billion in equity. According to parties in the know, the Chinese company is looking to use the majority of the funds to buy back 20% of its stock from Yahoo Inc.
Yahoo, who have seen better days invested $1 billion in then upstart Alibaba in 2005 for a 40% stake. That investment now represents more than half of the company’s $20 billion market value. The search company has experienced decreasing revenues and profits related to advertising and have been coursing a tumultuous road.
The company’s past dealings haven’t always been the smoothest either, adding interest to the overall situation. Based on an agreement reached between the two in May, Yahoo will sell back an additional 10% of the company’s stake once the company goes public and manage the remainder as they see fit.
The round is comprised of an international representation of investors. Parties include hedge funds, sovereign wealth funds, mutual funds as well as PE firms. Strong consideration was given to limiting the number of investors to limit the release of financial information as much as possible.
The composition of the funding is $1.5 billion in convertible preferred shares (based on the aforementioned $43 billion valuation), the sale of $2.6 billion in common shares (based on a $45 billion valuation) and $4 billion in debt thanks to the China Development Bank.
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