The WSJ reports,"Alibaba's less-than-revealing IPO filing failed to deliver the validation SoftBank investors needed to justify their high valuation on the Chinese business. A disclosure that SoftBank has signed over much of its voting rights to Alibaba insiders likely didn't help.
Even after this week's slide, a sum-of-the-parts analysis shows a rosy view of Alibaba in SoftBank's market capitalization of $87.5 billion. Adding on net debt of $69 billion gives an enterprise value for SoftBank of $156.5 billion.
Of that, attribute $54 billion to SoftBank's Japanese telecommunications business, assuming it is worth 4.7 times earnings before interest, taxes, depreciation and amortization, the average multiple of two Japanese competitors. Another $39 billion can be accounted for by SoftBank's stakes in listed companies Sprint, Yahoo Japan and Japanese mobile game provider GungHo Online Entertainment. A stake in Finnish mobile-game company Supercell accounts for another $1.5 billion at its acquisition cost.
The $62 billion that is left gives a rough estimate of what investors think SoftBank's stake in Alibaba is worth. Since SoftBank owns 34% in Alibaba, that implies a $182 billion value for Alibaba as a whole. That puts it around the midpoint of analyst estimates of Alibaba's worth, though it doesn't factor in any tax or conglomerate discounts, which would significantly increase the implied value of Alibaba".
"SoftBank investors have more to keep in mind than just Alibaba's valuation. The company posted a 28% on-year decline in net profit for the three months ended in March, weighed down by costs from serial acquisitions and a telecom price war in Japan. And SoftBank still appears keen for its Sprint unit to make a bid for T-Mobile, despite regulator skepticism. The deal has strategic logic as it would help consolidate Sprint's position in the U.S., but it would also expand SoftBank's net debt, which already is at six times Ebitda, much higher than telecom peers.
SoftBank's shares are down 20% this year, which could tempt investors to jump back in. With so many moving parts, however, it will take a stellar Alibaba IPO to make such a plunge worth it".
