Why A Deal Might Happen Next Between Yahoo! and Alibaba Group
Where we go from here is anyone’s guess, but my bias is that Taobao and Alipay are still part of the Alibaba Group family, of which Yahoo! and Softbank are part-owners.
I also believe that there is likely a lot of behind-the-scenes discussions going on between the three parties (or at least Yahoo! and Alibaba) about Alibaba Group enlarging its ownership of the group and Yahoo! and/or Softbank decreasing theirs.
Depending on the price and the amount Alibaba wants to buy back from Yahoo!, this could be a very good thing for Yahoo! shareholders.
Not only would Yahoo! immediately get a lot of cash up-front to supplement the $3 a share in cash they have already, but the transaction price would set a firm valuation for Yahoo!’s remaining stake. Right now, various Yahoo! analysts have made estimates about what Yahoo!’s stake is worth but I think they’re all way too low. A transaction now would force them to up the value.
Hopefully, Yahoo! would also negotiate for a firm timeline for when Alipay and Taobao will IPO. Whatever the transaction price is for Yahoo!’s stake now, it’s going to be appreciably less than the likely IPO price.
Yahoo! is better off with a deal like this where they hang on to the upside call option of their stake in Alibaba Group but they are no longer such a large owner that they’re aggravating the Chinese government or Jack Ma.
I think this is a deal that YHOO can get Jack Ma to agree, lessen their ownership stakes in Alibaba Group, Jack Ma will buy and pay it with reasonable amount but in return also Jack Ma will guaranteed the IPO of Taobao and Alipay. This will give Jack Ma at least a peace of mind with foreign ownership less than 50% or guaranteed that YHOO will not swap his YHOO Japan stakes to increase his Alibaba stakes to over 50%. So the likely will happen to YHOO Japan stakes is a tax free spin off to YHOO shareholders. I think the latter very quick after the deal is struck between YHOO and Alibaba. Back to $18+ after the deal and to over $20+ after the spin off of YHOO Japan stakes. I am buying more YHOO shares tomorrow for sure!!
If you're right, this will nevertheless have diminished the work-out value of YHOO......not necessarily by a huge amount, but less in any event, as it again demonstrates and proves the blatant incompetence of YHOO's Management, Yang and the BOD.
What a bunch of boobs... thank goodness for the inherent values!!