Yahoo will let shareholders have its Alibaba stake, but are star-eyed investors getting the riches they expect?

Yahoo will let shareholders have its Alibaba stake, but are star-eyed investors getting the riches they expect?

1 February 2015, 06:11
Sergey Golubev
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Alibaba.com  tumbled 8.8%, a day after Yahoo finally answered investor chirping by announcing it will spin off its remaining stake in the Chinese e-commerce giant to shareholders. Are we looking at a case of be careful what you wish for?

The assumption held by those clamoring for Yahoo to spin off the Alibaba stake has been that fast-growing Alibaba basically accounts for the entire current value of Yahoo stock, and divesting it in a tax-free manner is the best way to deliver all of that value to shareholders.

“Honeymoon Period Ends,” Stifel Nicolaus analysts headlined their Thursday recap of Alibaba’s quarterly results, which disappointed Wall Street and prompted the stock selloff. Of perhaps even more concern was Wednesday’s release of a white paper from an arm of the Chinese government taking Alibaba’s Taobao marketplace to task for failing to control counterfeit products being sold on its platform.

The financial results included a shortfall in both revenue and monetization rates stemming from the core Chinese retail business, Stifel wrote, a troubling development considered the widely-held expectations that Alibaba’s command of the Chinese market all-but-guarantees its growth rates will remain attractive.

Shares of Alibaba closed at $89.81, still 32% above its $68 IPO price, but down 25% from the $120.00 high of mid-November. Thursday’s dip docked founder Jack Ma $1.3 billion, according to the Forbes real-time billionaires rankings. (Though he won’t shed many tears over it, with a fortune still worth $20.8 billion.) Joe Tsai saw his fortune fall $534 million.

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