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Yahoo - Why Pay Full Price For Alibaba When You Can Get It At A Discount

Summary

Quick "RemainCo" valuation summary.

Alibaba - Tons of growth and tons of potential.

Value creation from other remaining assets.

Yahoo! Inc. (NASDAQ:YHOO) sold its core business and real estate to Verizon (NYSE:VZ) last July 25, 2016 for over $4.8 billion in cash (conference call). The leftover company will change its name on closing in hopefully 6-9 months, and is currently referred to as "RemainCo". This investment company will include Yahoo's cash hoard, stakes in Alibaba Group Holdings (NYSE:BABA) and Yahoo Japan, Yahoo's convertible notes, some minority investments, and Yahoo's non-core patents (the Excalibur portfolio). Value investors interested in a potential great return over the next year or two, and growth investors, who are interested in buying into Alibaba's recent performance, should examine Yahoo closer as the company will reward shareholders after the Verizon sale is complete.

Ok, here we go. Yahoo had $7.7 billion in cash and marketable securities as of its conference call on the Verizon sale on July 26, 2016. The core Yahoo business that will be sold to Verizon on closing will equate to $4.8 billion plus after taxes. Yahoo owns 35.5% of Yahoo Japan, which translates into around $8.9 billion in pretax US dollars after Friday, August 12, 2016's close. Yahoo also owns a 15% stake in Alibaba, which now translates into a little over $34 billion in pretax value after Friday's close. These main assets currently equal $55.4 billion in company value, which spread...


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