Yahoo Inc. (NDAQ:YHOO) shares were up over eight percent on Friday after shareholders got wind of Alibaba's substantial initial offering prices of which the search portal company already owns 40 percent. However, shares came crashing down today after the company said it plans on purchasing an additional 10 percent of the company post-IPO.

Yahoo's stake in Alibaba should be worth around $3.5 billion if the initial offering prices as expected at the top of its range. This stake would be close to 10 percent of Yahoo's market cap, which does not factor in any gains in share price giong forward. And given the fact that the average Chinese IPO gains over a hundred percent in the first day - those numbers could be substantial.

So, why are Yahoo shares down today? Well, the company announced that it intends to purchase an additional $100 million stake in Alibaba instead of sell its shares at the inflated IPO prices. Many analysts expect that the Chinese market is overheated and a drawback is almost imminent. Given that Yahoo doesn't intend on selling, its stake in Alibaba could suffer in the future when the Chinese market finally retraces back to reasonable levels.

However, in the long-run, this partnership could be great news for the portal giant. Alibaba's strength in the Chinese import/export business is substantial and the portal is one of the largest online trading platforms in existence for B2B commerce. A majority stake in the company at these prices would allow Yahoo to take advantage of growing export opportunities in China and import opportunities in the US. Combined, these factors make YHOO a stock worth watching!

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