Friday, November 1, 2013

Yahoo Keeps a Bigger Stake in its Crown Jewel

Why Restructuring the Alibaba Deal Makes Sense

FSR Staff

On October 15th, Yahoo (YHOO) reached terms to sell only 9.6% of its 24% ownership stake in Alibaba as part of the chinese e-commerce much anticipated IPO slated to arrive in the coming months.  Yahoo can sell the remaining shares after the IPO lockup period expires, usually a period of six months after the shares are listed on an exchange. In this arrangement, Yahoo is retaining 20% more shares than under the original agreement. A conservative valuation of Alibaba is $80 billion dollars, meaning Yahoo stands to gain somewhere around $20 billion from the filing of which $8 billion will be available to the company and $12 billion or 14.4% stake will remain under the Yahoo roof until lockup Ends.

This news is a positive sign that Yahoo is confident Alibaba will continue to grow at a fast clip and reach a higher market cap in the next year or so. Yahoo stands to benefit on the order of $480 million millions if the company can achieve a $100 billion market cap down the road. This assumes the company's IPO garners a $80 billion initial offering value and tacks on $20 billion over the next 6-12 months. If Yahoo sells out the remaining 14.4% stake entirely at $100 billion, it stands to receive another cash infusion north of $14 billion dollars which alone represents 40% of its current market cap of $35.35 billion.

Where do we see Yahoo headed in the next 12-18 months? To find out now, email us receive a free copy of our monthly newletter at


Foundry Stock Review and its contributors have no positions in Yahoo (YHOO) the security detailed in this blog as of 11/01/2013. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.

Foundry Stock Review is an earnings focused investment newsletter. Foundry Stock Review, LLC is not a registered investment advisor and the data contained in this newsletter has been gathered from external sources and is believed to be accurate as of publication. The content of this blog is for information purposes only and is not a solicitation to buy or sell any individual securities. It is important that you consult with your investment advisor and tax advisor before making investment decisions. Past performance is not indicative of future results.

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