That's very true, but those shorting Yahoo take the considerable risk that Yahoo doesn't adequately reflect the BABA contribution, so Yahoo could move up though BABA remains constant as the price of Yahoo reaches a balance with the value of its component parts. I don't doubt that some have made the decision to short Yahoo to hedge BABA, I just believe its the wrong thing to do.
The best way for Alibaba to team with Yahoo is by way of a purchase by SoftBank, which could be done with SoftBank stock. BABA shares on the Yahoo balance sheet would be marked up when they go to the SoftBank balance sheet, but I believe that US taxes would be avoided at the Yahoo level.
JCP was not cash flow positive for Q2. Operations generated net positive cash of $137, investing activities consumed $42 in cash, and financing consumed $229 in cash. The reason they were not cash flow positive is that they chose to reduce their debt.
Rather than looking at one quarter, one should take a longer view of the situation. JCP now seems to be on track to maintain a positive cash flow over the long term.
I noticed that too. SoftBank could easily purchase Yahoo, gain additional share of BABA, and team with BABA for development of the US market.
The fact is that Yahoo buyers are not giving BABA shares held by Yahoo the same value as those shares on the open market. The proper step now is to buy YHOO and short BABA, but shorting BABA will not be possible until late next week, at the soonest.
The rate at which YHOO shares are being traded is close to that of BABA. This observation indicates that the two are linked. But I'm not sure what the linkage is. Are Yahoo holders jumping to BABA? Are BABA holders shorting Yahoo as a hedge? Are funds trying to reduce their BABA holdings by liquidating shares previously held in YHOO? I could go on with other possible explanations. No single explanation explains what we are seeing, but all taken together do.
There's an irrational element contained within the price of any stock. For those undergoing an IPO, and any close proxy such as Yahoo is today, the irrational element dominates the price. Please keep in mind that the sum of the parts of Yahoo exceeds the current price by a wide margin.
At $88, there is still an excess of buyers over sellers of tens of millions of shares. How many want to own BABA at $100 rather than YHOO at $45?
The exchange is still trying to balance buy orders with sell orders, but can't find many sells. That's not surprising since Aibaba made sure that very few of those receiving an original allocation would be willing to dump shortly after the open.
People are still staying away from YHOO with the dream that they can buy BABA at a reasonable price. That dream is about to come to an end.
Perhaps the $400 million was the only way that Lampert could keep SHLD alive. Such would be a suitable defense to any lawsuit.
Your action is fairly typical of what others have historically done in a similar situation. After 3Com spun off Palm, shares of Palm were bought at about 50% more than they could have been purchased by buying 3Com. Some investors just appear to need a pure play. Yahoo represents a diluted version of BABA. History has shown that purchase of the proxy (YHOO) and short sale of the pure play (BABA), is the better investment.
In a situation like this there are many more factors affecting the price of Yahoo than under normal circumstances. The proper price of Yahoo will be sorted out by the market within a week or two, as questions regarding the course of events surrounding BABA are answered.
However, there is one thing of which everyone can be sure. The value of the Yahoo core business, without any contribution from SoftBank or Alibaba, is not negative.
A great way for a hedge fund to play this would be to short the stock, and cover the shorts in the option market.
Some who have previously invested in YHOO want a pure play in BABA, regardless of the fact that they will be buying BABA directly for more than they could purchase the same shares through YHOO. Disparity between a stock and its proxy has happened many times in the past, but it doesn't generally last for longer than a couple days or weeks.