5 ms·

Wouldn't this just provide an opening for a investment firm to swoop in, buy Yahoo, sell all their assets and cash out? Because no one is doing that... I'd hav

Wouldn't this just provide an opening for a investment firm to swoop in, buy Yahoo, sell all their assets and cash out? Because no one is doing that... I'd have to guess there is more going on

vecter 12y ago
Liquidity has a cost. Yahoo probably has many illiquid assets, not to mention transaction costs. Plus, who has $37B to throw around?
- ISL 12y ago
  Google. Berkshire. Apple. Etc.
  - parfe 12y ago
    Google wouldn't want to face the anti-trust hearings. Apple doesn't have any goals to spend half their cash on hand (Other than the iphone 6 being 11% larger/smaller/whiter/lighter) Buffet isn't a fan of tech stocks (or any bussiness he doesn't understand) http://wallstcheatsheet.com/stocks/heres-why-warren-buffett-mostly-avoids-tech-stocks.html/?a=viewall http://wallstcheatsheet.com/stocks/heres-why-warren-buffett-...
  - sirkneeland 12y ago
    or a middle eastern sovereign wealth fund, or a Chinese mega-corp?
prostoalex 12y ago
There's likely a bunch of liabilities and break-up fees involved in such liquidation. Real estate, data center space is likely to be under long-term leases with penalties for early termination. Personnel layoffs are not a trivial thing either - there are severance costs which in case of upper management can run into tens of millions - http://sacramento.cbslocal.com/2014/04/17/fired-yahoo-coo-gets-58m-severance-package-for-15-months-of-work/ http://sacramento.cbslocal.com/2014/04/17/fired-yahoo-coo-ge... And that's just US - Yahoo! has a network of European offices which likely have more protective labor laws.
- dlubarov 12y ago
  Rather than liquidating the entire company, Yahoo could sell its Yahoo Japan and Alibaba shares, pay a one-time dividend, and keep its core business intact. The now-isolated core business would have positive value. But it might be difficult to acquire a controlling interest in Yahoo without driving up the price.
  - prostoalex 12y ago
    Yeah, it has long been a point among activist investors. With Alibaba IPO the liquidity is there, the question is whether Yahoo! will get the best return now or in the future - they were somewhat criticized for divesting of their Google shares at $82-83 a share http://blogs.wsj.com/overheard/2012/02/28/yahoo-buys-low-sells-low/ http://blogs.wsj.com/overheard/2012/02/28/yahoo-buys-low-sel... Also, $100 chunk of Alibaba shares is not $100 distributed to you if you're a Yahoo! shareholder - first there's US corporate tax on that income, and then a dividend tax on top of that, which could be qualified or non-qualified depending on your shareholder status.
  - dragonwriter 12y ago
    > Rather than liquidating the entire company, Yahoo could sell its Yahoo Japan and Alibaba shares, pay a one-time dividend, and keep its core business intact. Except there is not a lot of reason to believe that either: 1. Yahoo could dump its holding of Yahoo Japan shares at current market prices (current share price is a good rough estimate of realizable value if you aren't trading enough to move the market, but selling off around a third of Yahoo Japan isn't that small of a block...) 2. Yahoo could actually find a buyer for its Alibaba holdings (a non-public firm) at the analyst estimate of its value used in the article. > The now-isolated core business would have positive value. The article doesn't really make the case for that. It says the core business is profitable, but current profitability doesn't mean positive value; it could be in debt, profitable, and not expected by the market to remain profitable long enough to get out of debt -- that would give it negative market value. Really, all the facts in the article tell you is that at least one of the following is false: 1) The author's implicit assumptions about the market value of Yahoo's core business, or 2) The estimated value of privately-held Alibaba, or 3) The assumption that realizing the value of its holdings in YJ and Alibaba would be transaction-cost free for Yahoo (and thus that those holdings should be undiscounted when aggregate to determine Yahoo's worth), or 4) The efficient market hypothesis. I have no problem believing that all four are false, and misleading in this case.
firebones 12y ago
That's what I wondered. Wouldn't they be better Icahn-bait than eBay?
- spullara 12y ago
  I think you should probably review Icahns previous run at Yahoo.

Wouldn't this just provide an opening for a investment firm to swoop in, buy Yahoo, sell all their assets and cash out? Because no one is doing that... I'd have to guess there is more going on

vecter 12y ago

Liquidity has a cost. Yahoo probably has many illiquid assets, not to mention transaction costs. Plus, who has $37B to throw around?

ISL 12y ago
Google. Berkshire. Apple. Etc.
- parfe 12y ago
  Google wouldn't want to face the anti-trust hearings. Apple doesn't have any goals to spend half their cash on hand (Other than the iphone 6 being 11% larger/smaller/whiter/lighter) Buffet isn't a fan of tech stocks (or any bussiness he doesn't understand) http://wallstcheatsheet.com/stocks/heres-why-warren-buffett-mostly-avoids-tech-stocks.html/?a=viewall http://wallstcheatsheet.com/stocks/heres-why-warren-buffett-...
- sirkneeland 12y ago
  or a middle eastern sovereign wealth fund, or a Chinese mega-corp?

prostoalex 12y ago

There's likely a bunch of liabilities and break-up fees involved in such liquidation. Real estate, data center space is likely to be under long-term leases with penalties for early termination. Personnel layoffs are not a trivial thing either - there are severance costs which in case of upper management can run into tens of millions - http://sacramento.cbslocal.com/2014/04/17/fired-yahoo-coo-gets-58m-severance-package-for-15-months-of-work/ http://sacramento.cbslocal.com/2014/04/17/fired-yahoo-coo-ge... And that's just US - Yahoo! has a network of European offices which likely have more protective labor laws.

dlubarov 12y ago
Rather than liquidating the entire company, Yahoo could sell its Yahoo Japan and Alibaba shares, pay a one-time dividend, and keep its core business intact. The now-isolated core business would have positive value. But it might be difficult to acquire a controlling interest in Yahoo without driving up the price.
- prostoalex 12y ago
  Yeah, it has long been a point among activist investors. With Alibaba IPO the liquidity is there, the question is whether Yahoo! will get the best return now or in the future - they were somewhat criticized for divesting of their Google shares at $82-83 a share http://blogs.wsj.com/overheard/2012/02/28/yahoo-buys-low-sells-low/ http://blogs.wsj.com/overheard/2012/02/28/yahoo-buys-low-sel... Also, $100 chunk of Alibaba shares is not $100 distributed to you if you're a Yahoo! shareholder - first there's US corporate tax on that income, and then a dividend tax on top of that, which could be qualified or non-qualified depending on your shareholder status.
- dragonwriter 12y ago
  > Rather than liquidating the entire company, Yahoo could sell its Yahoo Japan and Alibaba shares, pay a one-time dividend, and keep its core business intact. Except there is not a lot of reason to believe that either: 1. Yahoo could dump its holding of Yahoo Japan shares at current market prices (current share price is a good rough estimate of realizable value if you aren't trading enough to move the market, but selling off around a third of Yahoo Japan isn't that small of a block...) 2. Yahoo could actually find a buyer for its Alibaba holdings (a non-public firm) at the analyst estimate of its value used in the article. > The now-isolated core business would have positive value. The article doesn't really make the case for that. It says the core business is profitable, but current profitability doesn't mean positive value; it could be in debt, profitable, and not expected by the market to remain profitable long enough to get out of debt -- that would give it negative market value. Really, all the facts in the article tell you is that at least one of the following is false: 1) The author's implicit assumptions about the market value of Yahoo's core business, or 2) The estimated value of privately-held Alibaba, or 3) The assumption that realizing the value of its holdings in YJ and Alibaba would be transaction-cost free for Yahoo (and thus that those holdings should be undiscounted when aggregate to determine Yahoo's worth), or 4) The efficient market hypothesis. I have no problem believing that all four are false, and misleading in this case.

firebones 12y ago

That's what I wondered. Wouldn't they be better Icahn-bait than eBay?

spullara 12y ago
I think you should probably review Icahns previous run at Yahoo.