Alibaba, the Chinese e-ecommerce giant behind one the of the most widely anticipated initial public offerings in recent memory, is not yet a public company, but that is not stopping some speculating about what companies could be post-IPO takeover targets for IPO.
Although Alibaba does not always make full acquisitions, rather opting for minority stakes in many instances, the company is 2014’s most acquisitive Chinese firm, reports Tara Lachapelle for Bloomberg. Noteworthy is that Alibaba’s acquisitions and investments span well-beyond e-commerce, indicating the company has designs on establishing the type of Internet and technological reach usually reserve for storied companies such as Google (NasdaqGS: GOOGL) and Amazon (NasdaqGS: AMZN).
There is an exchange traded fund that is home to several possible Alibaba takeover candidates and it is a fund that might surprise some investors: The First Trust ISE Cloud Computing Index Fund (NasdaqGM: SKYY).
Actually, it should be surprising that SKYY holds some companies that Alibaba could consider acquiring. After all, Amazon is a burgeoning cloud computing player and that company, perhaps the U.S. firm to which Alibaba is most often compared, is 3.1% of SKYY’s weight. [Amazon is Hurting These ETFs]
Alibaba’s designs on becoming a cloud-computing leader could prompt it to make deals for U.S. companies because China’s cloud footprint still trails that of the U.S. That could have Alibaba calling on Red Hat (NYSE: RHT), among others, Bloomberg reports.
Red Hat “specializes in open-source software and services. Intuit, the $24 billion maker of TurboTax, has been diversifying into software for tablets and smartphones,” according to Bloomberg. Shares of Red Hat accounted for 3.63% of SKYY as of Sept. 9, making the stock the ETF’s fifth-largest holding, according to First Trust data.
The Bloomberg piece mentions several SKYY holdings as candidates for an Alibaba takeover, including Rackspace Holding (NYSE: RAX), Akamai Technologies (NasdaqGS: AKAM) and Intuit (NasdaqGS: INTU). Those stocks combine for 7.3% of SKYY’s weight. The largest of the three by market value is Intuit at just over $24 billion, but any of the three could easily be digested by Alibaba given the Chinese company’s estimated valuation in the area of $160 billion. [What Alibaba’s Valuation Means for ETFs]
Although it is not likely in the near-term, Alibaba could eventually make a play on Yahoo (NasdaqGS: YHOO), Bloomberg reports. Yahoo owns 23% of Alibaba and is expected to trim that stake by about 20% in the IPO. Yahoo is not a member of SKYY’s lineup, but it is nearly 5% of the First Trust Dow Jones Internet Index Fund (NYSEArca: FDN).
First Trust ISE Cloud Computing Index Fund
