Tomahawk, WI 09/18/2014 (Basicsmedia) – New York University’s Professor, Aswath Damodaran, has quashed concerns about Alibaba Group Holding Ltd (NYSE:BABA) valuation, reiterating the company is fairly valued at $162.9 billion or $66.45 a share. During an interview on CNBC, Damodaran reiterated that he will not be purchasing stakes in the company because of ownership concerns.
Damodaran main concern is that it would be extremely difficult for investors to determine Alibaba Group Holding Ltd (NYSE:BABA)’s destiny, amidst founder and Chairman, Jack Ma, assuming his seat in the company’s board.
“It is the first IPO in a while that I have actually valued, and the first reaction I had was, what did I do wrong? There are two different processes. There is almost complete coincidence when it does happen, but I think the fact that they have so much on the ground that you can value, makes it easier to price a company like this,” said Mr. Damodaran.
Back in May, Damodaran had valued Alibaba Group Holding Ltd (NYSE:BABA) at $142.59 billion representing a share price target of $60 but has since increased his valuation to $66.45 a share in line with the company’s IPO price range of between $66 and $68. Alibaba is relatively cheap when compared to its peers in the industry and expected to go up after the IPO, should everything turn up as planned.
Alibaba Group Holding Ltd (NYSE:BABA) e-commerce market share in China currently stands at 79% compared to Amazon.com, Inc. (NASDAQ:AMZN)’s 2%. Damodaran argues that acquiring stakes in Alibaba translates to buying a shell and not the entire piece as Jack Ma continues to control a better part of the company.
“[…] The way I see it, traders date companies; investors marry companies and if you marry a company you’ve got to be in for the long-term. It scares the heck out of me that I have absolutely no power over how this company will be run or what can happen in the future,” said Mr. Damodaran.