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> Yahoo (net of BABA) is less than worthless. This fallacy needs to die. You cannot just subtract the value of Alibaba and declare the company "less than wort

> Yahoo (net of BABA) is less than worthless. This fallacy needs to die. You cannot just subtract the value of Alibaba and declare the company "less than worthless". Company valuations don't work that way Yahoo has significant debt. If Yahoo were willing and able to liquidate Alibaba or Yahoo Japan the proceeds would be used, at least partially, to pay off that debt. You cannot stick all of the company's debt on a select portion of the business and declare it worthless based on that.

jack9 10y ago
> You cannot just subtract the value of Alibaba and declare the company "less than worthless". I can and do. > Company valuations don't work that way I disagree, except if you care to shell out <10 million and say "see it's worth something!" which is disingenuous. The amount to maintain the remnants will dwarf the cost of acquisition, making it a net loss.
- vonmoltke 10y ago
  > I can and do. Then you're wrong. That isn't how company book value works. A company's book value is the total of its assets minus the total of its liabilities. Removing an asset from the calculation without adjusting the liabilities is just wrong. It isn't proper accounting. > I disagree, except if you care to shell out <10 million and say "see it's worth something!" which is disingenuous. The amount to maintain the remnants will dwarf the cost of acquisition, making it a net loss. What numbers do you have to support this? What portion of Yahoo's liabilities are coming along with the assets Verizon wants to buy?
- Yhippa 10y ago
  You are correct for market value: http://www.investopedia.com/stock-analysis/070215/why-yahoos-core-business-negatively-valued-baba-yhoo-goog-amzn-fb.aspx http://www.investopedia.com/stock-analysis/070215/why-yahoos... > Yahoo’s total market cap is less than the $40.5 billion, and after accounting for the cash on the company’s balance sheet, this means Yahoo’s core business is valued at less than $0. Now, this isn’t a new development that will disappear with some quick arbitrage. In fact, the value of Yahoo’s core business has been negatively valued for more than a year, so investors are seeing the value discrepancy measured by traditional means but just don’t believe in the company’s trajectory.
  - vonmoltke 10y ago
    That article is making a different mistake. It is looking at market cap versus total assets. That isn't a very good measure and does not mean investors place negative value on the core business. Yahoo's book value is only about $27B, which is the amount that would be left if the company were liquidated today (notwithstanding liquidation costs). Since their price/book ratio is greater than 1 it means investors do put value on the future business, albeit not very much.
mikeash 10y ago
The article talks about efforts to spin off the BABA part. Verizon is only buying certain pieces of Yahoo. Is it really that absurd to talk about the different pieces?
- vonmoltke 10y ago
  It is absurd to talk about separate assets without talking about where the liabilities go. Yahoo has over $16B in total liabilities. You cannot attach all the liabilities of a company to a specific part of its assets.
  - mikeash 10y ago
    OK, so where do all the liabilities go in this case?
    - vonmoltke 10y ago
      That depends on how the deal is structured and what happens to the other pieces. This is where mergers and acquisitions get complicated. Part of Verizon's price tag might be assumed liabilities from Yahoo. Maybe part of the Alibaba stake gets sold to cover them. Maybe it stays with whatever the holding company remnant will be. Can't tell from just a public balance sheet and a headline. However, assuming Verzion is going to take on all $16B of Yahoo's liabilities when they are getting a relatively small portion of the assets is ludicrous.
      - mikeash 10y ago
        Makes sense. Do I understand correctly, then, that Verizon is taking on an unknown amount of Yahoo's debt as part of this deal, with the exact quantity to be determined by what the two parties negotiate, and until that's known it's pointless to talk about the net value of the piece that Verizon is buying?
        vonmoltke 10y ago
bogomipz 10y ago
Isn't the problem with them divesting both of those entities - Alibaba and Yahoo Japan, the outsized tax burden from the sale? I thought this was the reason it was a non-starter this past year.
- vonmoltke 10y ago
  Possibly, but I notice the vast majority of the deferred tax burden Yahoo has came on to the books at roughly the same time as the Alibaba investment, so the tax hit may already be reflected in the balance sheet. Edit (the numbers): Long-term investments: 31DEC13: $5B -> 31DEC14: $44.6B Deferred Long Term Liability Charges: 31DEC13: $1.1B -> 31DEC14: $17.1B

jack9 10y ago

> You cannot just subtract the value of Alibaba and declare the company "less than worthless". I can and do. > Company valuations don't work that way I disagree, except if you care to shell out <10 million and say "see it's worth something!" which is disingenuous. The amount to maintain the remnants will dwarf the cost of acquisition, making it a net loss.

vonmoltke 10y ago
> I can and do. Then you're wrong. That isn't how company book value works. A company's book value is the total of its assets minus the total of its liabilities. Removing an asset from the calculation without adjusting the liabilities is just wrong. It isn't proper accounting. > I disagree, except if you care to shell out <10 million and say "see it's worth something!" which is disingenuous. The amount to maintain the remnants will dwarf the cost of acquisition, making it a net loss. What numbers do you have to support this? What portion of Yahoo's liabilities are coming along with the assets Verizon wants to buy?
Yhippa 10y ago
You are correct for market value: http://www.investopedia.com/stock-analysis/070215/why-yahoos-core-business-negatively-valued-baba-yhoo-goog-amzn-fb.aspx http://www.investopedia.com/stock-analysis/070215/why-yahoos... > Yahoo’s total market cap is less than the $40.5 billion, and after accounting for the cash on the company’s balance sheet, this means Yahoo’s core business is valued at less than $0. Now, this isn’t a new development that will disappear with some quick arbitrage. In fact, the value of Yahoo’s core business has been negatively valued for more than a year, so investors are seeing the value discrepancy measured by traditional means but just don’t believe in the company’s trajectory.
- vonmoltke 10y ago
  That article is making a different mistake. It is looking at market cap versus total assets. That isn't a very good measure and does not mean investors place negative value on the core business. Yahoo's book value is only about $27B, which is the amount that would be left if the company were liquidated today (notwithstanding liquidation costs). Since their price/book ratio is greater than 1 it means investors do put value on the future business, albeit not very much.

mikeash 10y ago

The article talks about efforts to spin off the BABA part. Verizon is only buying certain pieces of Yahoo. Is it really that absurd to talk about the different pieces?

vonmoltke 10y ago
It is absurd to talk about separate assets without talking about where the liabilities go. Yahoo has over $16B in total liabilities. You cannot attach all the liabilities of a company to a specific part of its assets.
- mikeash 10y ago
  OK, so where do all the liabilities go in this case?
  - vonmoltke 10y ago
    That depends on how the deal is structured and what happens to the other pieces. This is where mergers and acquisitions get complicated. Part of Verizon's price tag might be assumed liabilities from Yahoo. Maybe part of the Alibaba stake gets sold to cover them. Maybe it stays with whatever the holding company remnant will be. Can't tell from just a public balance sheet and a headline. However, assuming Verzion is going to take on all $16B of Yahoo's liabilities when they are getting a relatively small portion of the assets is ludicrous.
    - mikeash 10y ago
      Makes sense. Do I understand correctly, then, that Verizon is taking on an unknown amount of Yahoo's debt as part of this deal, with the exact quantity to be determined by what the two parties negotiate, and until that's known it's pointless to talk about the net value of the piece that Verizon is buying?
      - vonmoltke 10y ago

bogomipz 10y ago

Isn't the problem with them divesting both of those entities - Alibaba and Yahoo Japan, the outsized tax burden from the sale? I thought this was the reason it was a non-starter this past year.

vonmoltke 10y ago
Possibly, but I notice the vast majority of the deferred tax burden Yahoo has came on to the books at roughly the same time as the Alibaba investment, so the tax hit may already be reflected in the balance sheet. Edit (the numbers): Long-term investments: 31DEC13: $5B -> 31DEC14: $44.6B Deferred Long Term Liability Charges: 31DEC13: $1.1B -> 31DEC14: $17.1B