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I can see how this benefits Yahoo's shareholders, and they are after all a publicly traded company. It still seems like an exceptionally poor way for Yahoo its

by skuhn 12y ago

I can see how this benefits Yahoo's shareholders, and they are after all a publicly traded company. It still seems like an exceptionally poor way for Yahoo itself to reap the rewards of this long term investment, particularly when it needs to inject some life into its business by spending on talent acquisition or new ventures. Here's how I think the Alibaba investment breaks down for Yahoo: Yahoo paid $1bn to Alibaba in 2005. They sold a portion back to Alibaba in 2012 for $4.3bn (after tax), and returned $3.65bn of that to shareholders. Yahoo made $0.65bn after taxes. They sold more shares during the Alibaba IPO, and made $6.3bn (after tax), with a pledge to return $3.15bn. Yahoo made $3.15bn from the IPO. Yahoo's remaining stake is now valued at $40bn, which they intend to spin off into another company -- seemingly with no ownership interest for Yahoo (and therefore, no further financial stake). So over the course of ten years, Yahoo turned $1bn into $3.8bn. A 14.3% APY is nothing to sneeze at, but It sure is a far cry from the $103bn / 58.5% APY they could have had if they retained all of their Alibaba shares today. Even taking 40% off for taxes and a few billion for dividends, that is a lot of walking around town money. Besides shareholder goodwill and getting Alibaba off their back, I don't see what Yahoo gets of any real value. Yahoo's stock price will collapse when the Alibaba shares are spun off. A company worth $1-10bn has a lot more potential buyers than a $50bn company, and someone will acquire and consume Yahoo shortly thereafter. Unless they announce plans to spin off the Yahoo Japan shares, in which case a potential acquirer just needs to wait to pick them up for a few hundred million after that event.

dcole2929 12y ago
I agree with your thinking here but I don't think Marrissa had a choice either. Long term thinking if Yahoo wants to stick it out as an independently operating company this move is most likely short sighted, but at this point none of the investors want that. It's pretty clear that a large part of the board no longer believes in Yahoo's potential for success. They just want the money that is tied up in the Alibaba stock so they can move on with other ventures. Marissa's choices were either find a way to put a big chunk of cash in shareholder pockets ASAP or face a hostile board that was going to do it's best to take control of the company and divest the Alibaba stock anyway (you can see that certain characters on the board have been angling for this for a while now). Either way Yahoo probably loses but at least this way she has bought the company time to try and turn the corner and see if her vision can work.

by skuhn 12y ago

dcole2929 12y ago

I agree with your thinking here but I don't think Marrissa had a choice either. Long term thinking if Yahoo wants to stick it out as an independently operating company this move is most likely short sighted, but at this point none of the investors want that. It's pretty clear that a large part of the board no longer believes in Yahoo's potential for success. They just want the money that is tied up in the Alibaba stock so they can move on with other ventures. Marissa's choices were either find a way to put a big chunk of cash in shareholder pockets ASAP or face a hostile board that was going to do it's best to take control of the company and divest the Alibaba stock anyway (you can see that certain characters on the board have been angling for this for a while now). Either way Yahoo probably loses but at least this way she has bought the company time to try and turn the corner and see if her vision can work.