The boardroom intrigue revolves around a recent proposal from Starboard Value, a NY hedge fund that been pressuring Yahoo CEO Marissa Mayer to take dramatic steps to boost the company’s stock. Trouble is after stripping away its 15% stake in Chinese e-commerce site Alibaba (BABA), Yahoo Japan and accounting for its cash – Yahoo’s core business is less than worthless.
Advertisement
A Yahoo spokeswoman didn’t respond to a request for comment.
The Wall Street Journal, citing “a person familiar with Alibaba’s thinking”, said that the company is unlikely to make a bid for the troubled business. Yahoo has been overtaken in search and email by Google and beaten in media by Netflix and Amazon, while its messaging apps have lost users to Facebook and Snapchat.
Fully taxed Alibaba spinoff: This is the scenario investors are anxious about, and Squali estimates that the value of Yahoo’s various parts would be worth a total of only $37.43, a scant 3.9% upside to where the stock is now trading. It had first urged the sale of the core business in a November letter to Yahoo.
“Realizing value is far from assured, however”, Pivotal analyst Brian Wieser wrote in a note.
Other companies are reportedly interested in pieces of Yahoo! Inc. Yahoo plans to spin off its Alibaba stake into a public company along with Yahoo Small Business that provides domain names and local marketing.
It is best to sell Yahoo’s Internet services, CEO Marissa Mayer has decided. If the company does decide to go ahead with this decision, it could well be one of the biggest announcements of the year, which would attract major firms from various sectors for the buyout process.
Advertisement
Yahoo had previously planned to spin off its shares in Alibaba Holding Group, through a company called Aabaco Holdings, but has held back on the move because of uncertainties about potential tax implications. Starboard attributes the relatively low price of the Internet business to poor management of the division by Mayer and the Yahoo management team. The revenues are going to see a growth only after Alibaba matter was resolved. Even though the IRS declined to give Yahoo an advance ruling blessing the deal, Yahoo’s board authorized the spinoff in September. Also, the company issued a light guidance once again; for its fourth quarter of fiscal 2015 (4QFY15), the management expects revenue to fall within a $1.16-1.20 billion range, well below the consensus estimate of $1.33 billion.
