8 ms·

Less than the $5.7 billion Yahoo! paid in 1999 for Mark Cuban's Broadcast.com: http://money.cnn.com/1999/04/01/deals/yahoo/ http://money.cnn.com/1999/04/01/deal

by cs702 10y ago

Less than the $5.7 billion Yahoo! paid in 1999 for Mark Cuban's Broadcast.com: http://money.cnn.com/1999/04/01/deals/yahoo/ http://money.cnn.com/1999/04/01/deals/yahoo/ Times -- and fortunes -- change.

dchest 10y ago
Adjusted for inflation, $8.2 billion in 2016 dollars.
- jonknee 10y ago
  Adjusted for stock returns (since it was an all stock deal), $1.3b. And that includes the huge Alibaba stake that is most of Yahoo's value, if that deal never happened and Yahoo was just what Verizon bought the total would be ~$169m. Mark was smart and bought puts to protect his stake and then sold it so that he wasn't tied to Yahoo. In retrospect he was really smart.
  - beagle3 10y ago
    > Mark was smart and bought puts to protect his stake and then sold it so that he wasn't tied to Yahoo. In retrospect he was really smart. Also questionably legal. There's this little thing called SEC Rule 144 [0], which forbids this kind of action (attempting to preempt pump-and-dump IPOs and mergers). I have no knowledge of the specific details involved, but I find it unlikely that Cuban was not subject to Rule 144 - especially since you say "bought puts to protect his stake", which indicates he couldn't sell Yahoo shares at the time, and thus was almost surely subject to said rule. SEC enforcement was a joke (and possibly still is), but illegal actions are only ever smart in retrospect, post "statute of limitations". [0] https://www.sec.gov/investor/pubs/rule144.htm https://www.sec.gov/investor/pubs/rule144.htm
    - djhn 10y ago
      This is (afaik) a good description of his trade: http://investmentxyz.blogspot.fi/2006/05/cubans-collar-anatomy-of-famous-trade.html http://investmentxyz.blogspot.fi/2006/05/cubans-collar-anato... I'm not familiar enough with the SEC rules to add anything to your comment, other than it's the first time I hear this and it's.. interesting?
    - jonknee 10y ago
      Using options to smooth volatility is a common technique after M&A and was likely done for him by the same bankers that made the original acquisition. I am sure it was on the up and up.
      - beagle3 10y ago
        SEC enforcement was a joke for years, probably still is. A lot of people are doing this, so, yes it is a common technique, and no, it's not ok - it runs afoul of SEC Rule 144. No action or inquiry from the SEC is a bet that a lot of people are willing to take, and it pays well for most of them. So does lying to the IRS. Personally, I prefer to pay more taxes, and lose some income (I wanted to protect a 5X exit from downside using puts, and my tax/legal guy warned me against it and introduced me to 144. I ended up with a 1.1X return - I've lost 98% of the profit because the buyer's shares dropped 5 months after the purchase for a reason unrelated to the 5X exit I was a part of. Sums weren't life changing either way, in case you wonder).
adevine 10y ago
True, but most of the value in Yahoo is being left in the old company the owns the interests in Alibaba and Yahoo Japan.
- phamilton 10y ago
  Yeah. $5B is a small chunk of the current value of their $1B investment in Alibaba. Some investments work out. Others don't.
dogma1138 10y ago
It's hardly a unique case, AMD is worth less now than what it paid for ATI back in the day.
- byuu 10y ago
  That really had to be the dumbest moves in computing history. "What does the #2 CPU maker need to become #1? The #2 GPU maker, obviously!"
  - yulaow 10y ago
    Well to defend them they needed a solution to fight the incoming intel cpu with integrated gpu. They needed ATI portfolio and knowledges.
    - monocasa 10y ago
      Yeah, exactly. If they didn't have their APUs, they wouldn't have hardly anything anymore.
    - byuu 10y ago
      The integrated GPU really didn't need that kind of power, though. Anyone playing more than solitaire is going to get a discrete GPU anyway. They could have snapped up a smaller chipset maker for a tenth of the price. Instead they entered both the integrated and discrete GPU markets, when they were already a market underdog that already struggled in the CPU market. They paid way too much for ATI, and then spread themselves way too thin. I'm not just pointing out the error in hindsight, I was a critic of this deal back when it was first announced as well.
      - pcwalton 10y ago
        > Anyone playing more than solitaire is going to get a discrete GPU anyway That's not true. The PC enthusiast market is a small segment of the overall PC market, and that's not even counting mobiles. Lots of people play non-graphically-intensive games. More importantly, GPUs are hugely important for things that aren't games. Honestly, the fact that video needs hardware acceleration (which is part of the media/GPU block) means that there's a reasonable argument that games aren't even the most important practical function of a GPU.
sandstrom 10y ago
Had to look it up, for curiosity: In April 1999, Yahoo! acquired the company for $5.7 billion (or over $10,000 per user) in stock. [...] The company had 570,000 users. -- Wikipedia These 570k users only listened to audio, seems like the biggest waste ever. Cuban got a bunch of (undeserved?) money and Yahoo lost the same amount. Feels like a pointless transaction.
- tomp 10y ago
  Yahoo! didn't lose anything, only its investors did (as it paid with stock, not cash)... But then, they would have lost a lot anyways, because the whole market was overvalued.
  - ChuckMcM 10y ago
    I certainly see it differently. Investors have bought and sold Yahoo! stock all along. Had they bought it when the deal to buy Broadcast was announced and sold it 5 years later, they would have tripled their money. Are there Yahoo! investors who have lost money? Sure. That is true for every stock that is traded. Are their investors that made money? Sure, same deal. If one wanted to evaluate the performance of Yahoo! management in 1999 then one way to approach it would be to answer the question, "Given what Yahoo! knew at the time of the acquisition, what would have been a better use for that stock?" I personally can't imagine what that would have been.
    - fullshark 10y ago
      Use it for employee compensation.
- tuna-piano 10y ago
  I'm not so sure. Here's my reasoning, but I'm just using logic, I'm really not super in-tune to this stuff. If the company knew thought its stock was 10x overvalued (Yahoo's stock did drop 90% a year or so later) then they really only sold it for $570 million. That is, if Yahoo knew its stock would be worth 1/10 of its current value in a year, buying a company with $5.7B in stock will add value to Yahoo so long as The acquired company ends up being worth >$570M. That being said, if they knew their stock was overvalued, it would be best to issue additonal shares, as $1 is worth $1 regardless. Similiar to how undervalued companies should buy back their stock.

by cs702 10y ago

dchest 10y ago

Adjusted for inflation, $8.2 billion in 2016 dollars.

jonknee 10y ago
Adjusted for stock returns (since it was an all stock deal), $1.3b. And that includes the huge Alibaba stake that is most of Yahoo's value, if that deal never happened and Yahoo was just what Verizon bought the total would be ~$169m. Mark was smart and bought puts to protect his stake and then sold it so that he wasn't tied to Yahoo. In retrospect he was really smart.
- beagle3 10y ago
  > Mark was smart and bought puts to protect his stake and then sold it so that he wasn't tied to Yahoo. In retrospect he was really smart. Also questionably legal. There's this little thing called SEC Rule 144 [0], which forbids this kind of action (attempting to preempt pump-and-dump IPOs and mergers). I have no knowledge of the specific details involved, but I find it unlikely that Cuban was not subject to Rule 144 - especially since you say "bought puts to protect his stake", which indicates he couldn't sell Yahoo shares at the time, and thus was almost surely subject to said rule. SEC enforcement was a joke (and possibly still is), but illegal actions are only ever smart in retrospect, post "statute of limitations". [0] https://www.sec.gov/investor/pubs/rule144.htm https://www.sec.gov/investor/pubs/rule144.htm
  - djhn 10y ago
    This is (afaik) a good description of his trade: http://investmentxyz.blogspot.fi/2006/05/cubans-collar-anatomy-of-famous-trade.html http://investmentxyz.blogspot.fi/2006/05/cubans-collar-anato... I'm not familiar enough with the SEC rules to add anything to your comment, other than it's the first time I hear this and it's.. interesting?
  - jonknee 10y ago
    Using options to smooth volatility is a common technique after M&A and was likely done for him by the same bankers that made the original acquisition. I am sure it was on the up and up.
    - beagle3 10y ago
      SEC enforcement was a joke for years, probably still is. A lot of people are doing this, so, yes it is a common technique, and no, it's not ok - it runs afoul of SEC Rule 144. No action or inquiry from the SEC is a bet that a lot of people are willing to take, and it pays well for most of them. So does lying to the IRS. Personally, I prefer to pay more taxes, and lose some income (I wanted to protect a 5X exit from downside using puts, and my tax/legal guy warned me against it and introduced me to 144. I ended up with a 1.1X return - I've lost 98% of the profit because the buyer's shares dropped 5 months after the purchase for a reason unrelated to the 5X exit I was a part of. Sums weren't life changing either way, in case you wonder).

adevine 10y ago

True, but most of the value in Yahoo is being left in the old company the owns the interests in Alibaba and Yahoo Japan.

phamilton 10y ago
Yeah. $5B is a small chunk of the current value of their $1B investment in Alibaba. Some investments work out. Others don't.

dogma1138 10y ago

It's hardly a unique case, AMD is worth less now than what it paid for ATI back in the day.

byuu 10y ago
That really had to be the dumbest moves in computing history. "What does the #2 CPU maker need to become #1? The #2 GPU maker, obviously!"
- yulaow 10y ago
  Well to defend them they needed a solution to fight the incoming intel cpu with integrated gpu. They needed ATI portfolio and knowledges.
  - monocasa 10y ago
    Yeah, exactly. If they didn't have their APUs, they wouldn't have hardly anything anymore.
  - byuu 10y ago
    The integrated GPU really didn't need that kind of power, though. Anyone playing more than solitaire is going to get a discrete GPU anyway. They could have snapped up a smaller chipset maker for a tenth of the price. Instead they entered both the integrated and discrete GPU markets, when they were already a market underdog that already struggled in the CPU market. They paid way too much for ATI, and then spread themselves way too thin. I'm not just pointing out the error in hindsight, I was a critic of this deal back when it was first announced as well.
    - pcwalton 10y ago
      > Anyone playing more than solitaire is going to get a discrete GPU anyway That's not true. The PC enthusiast market is a small segment of the overall PC market, and that's not even counting mobiles. Lots of people play non-graphically-intensive games. More importantly, GPUs are hugely important for things that aren't games. Honestly, the fact that video needs hardware acceleration (which is part of the media/GPU block) means that there's a reasonable argument that games aren't even the most important practical function of a GPU.

sandstrom 10y ago

Had to look it up, for curiosity: In April 1999, Yahoo! acquired the company for $5.7 billion (or over $10,000 per user) in stock. [...] The company had 570,000 users. -- Wikipedia These 570k users only listened to audio, seems like the biggest waste ever. Cuban got a bunch of (undeserved?) money and Yahoo lost the same amount. Feels like a pointless transaction.

tomp 10y ago
Yahoo! didn't lose anything, only its investors did (as it paid with stock, not cash)... But then, they would have lost a lot anyways, because the whole market was overvalued.
- ChuckMcM 10y ago
  I certainly see it differently. Investors have bought and sold Yahoo! stock all along. Had they bought it when the deal to buy Broadcast was announced and sold it 5 years later, they would have tripled their money. Are there Yahoo! investors who have lost money? Sure. That is true for every stock that is traded. Are their investors that made money? Sure, same deal. If one wanted to evaluate the performance of Yahoo! management in 1999 then one way to approach it would be to answer the question, "Given what Yahoo! knew at the time of the acquisition, what would have been a better use for that stock?" I personally can't imagine what that would have been.
  - fullshark 10y ago
    Use it for employee compensation.
tuna-piano 10y ago
I'm not so sure. Here's my reasoning, but I'm just using logic, I'm really not super in-tune to this stuff. If the company knew thought its stock was 10x overvalued (Yahoo's stock did drop 90% a year or so later) then they really only sold it for $570 million. That is, if Yahoo knew its stock would be worth 1/10 of its current value in a year, buying a company with $5.7B in stock will add value to Yahoo so long as The acquired company ends up being worth >$570M. That being said, if they knew their stock was overvalued, it would be best to issue additonal shares, as $1 is worth $1 regardless. Similiar to how undervalued companies should buy back their stock.