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This is the only outcome that made sense. - Yahoo already has 7B in after-tax cash from the sale of a 7% share in Alibaba. - Yahoo could not just sell more BA
by ucha 12y ago
This is the only outcome that made sense.
- Yahoo already has 7B in after-tax cash from the sale of a 7% share in Alibaba.
- Yahoo could not just sell more BABA shares, incur a 35% tax just to complete some large acquisition while they already have 10B in cash which is more than the value of their core business.
- They still own 35% of Yahoo Japan and that share is worth another 7B in itself. Yahoo still has tons of assets.
What's interesting is that the market values Yahoo at around 50B at the moment. The BABA spinoff is worth 40B. They have 10B in cash. Their share of Yahoo Japan is 7B. Even before accounting for Yahoo's core business, they should be worth 57B. We're probably looking at an adjustment in their market cap if no legal obstacles to the spinoff are met.
- dragonwriter 12y ago> What's interesting is that the market values Yahoo at around 50B at the moment. The BABA spinoff is worth 40B. They have 10B in cash. Their share of Yahoo Japan is 7B. Even before accounting for Yahoo's core business, they should be worth 57B. Which suggests (assuming all that is accurate) that the market values Yahoo's "core business" as a $7 billion liability.
- JOnAgain 12y agoMore like the market is expecting them to lose the $10 billion in the bank (spending on money losing core businesses) rather than return money to shareholders.
- spullara 12y agoI think that the core business has an EBITDA of $1,362 million according to their 2014 results. That may be declining but it is still very much a profitable business. http://finance.yahoo.com/news/yahoo-reports-fourth-quarter-full-210500209.html http://finance.yahoo.com/news/yahoo-reports-fourth-quarter-f...
- encoderer 12y agoOr simply that $40bn in volatile stock that can't be sold for a year is not worth full face value. Which makes a lot of sense if you think about it.
- ucha 12y agoYou could hedge that risk by shorting the BABA stock at the same time you own YHOO. That way, you have no exposure to BABA.
- encoderer 12y agoEven if you're careful to short the same notional value, that's not a pairs trade that I would put on. It would open me to upside risk in BABA if YHOO does not perform as well. Correlations change all the time.
- hkmurakami 12y agoOr, the market is not behaving rationally at the moment. ;)
- GFK_of_xmaspast 12y agoYou're not supposed to say that kind of thing in this forum.
- MarkMc 12y agoI don't think the Alibaba spinoff would be worth $40 billion because it comes with a sizeable tax bill which shareholders will have to pay when they sell their shares.
- brianbreslin 12y agoWould they avoid the tax hit if its a stock swap? i.e. all stock deal for the acquisition? or buy them in cash in 2016, then the hit is capital gains (lower tax rate)? I'm asking/speculating
- tptacek 12y agoMatt Levine at Bloomberg (who is awesome) points out that Alibaba will simply buy the spinoff for stock, replacing spin-off shares with plain old Alibaba shares.
- mlrtime 12y agohere is the article: http://www.bloombergview.com/articles/2015-01-28/yahoo-would-rather-not-pay-taxes-on-its-alibaba-shares http://www.bloombergview.com/articles/2015-01-28/yahoo-would...