With Yahoo exploring a separation of its core business, the world may soon know what the company — minus its lucrative stake in Alibaba — is worth.
As of Wednesday, that figure is a negative (yes, negative) $13 billion.
How can a company that has $4.5 billion in revenue and one billion users be worth less than zero?
Let’s walk through the numbers.
The value of Yahoo’s stake in Alibaba is $32.5 billion and its stake in Yahoo Japan is $8.6 billion. The company’s net cash — or cash minus debt — is $4.2 billion. All told, that is $45.3 billion.
But stock market investors are assigning a valuation of $32.5 billion, based on Wednesday’s trading. The news that Yahoo was halting a spinoff of its stake in Alibaba, the Chinese e-commerce giant, choosing instead to explore a spinoff of Yahoo’s core Internet operations plus its stake in Yahoo Japan, sent shares lower, widening that gap.
On average, analysts value Yahoo’s core based on five times projected Ebitda – some a little higher, some a little lower. That yields a market capitalization of $4.6 billion if Yahoo were an independent company. Tack on the 35 percent stake in Yahoo Japan, worth about $8.6 billion, and you’ve got a $13.2 billion business that could be spun out.
If the transaction ultimately is taxed, the bill would be a lot smaller for the Yahoo core plus Yahoo Japan entity than the original plan to spin off its Alibaba stake. Assuming a 41 percent tax rate, as CRT did in Wednesday’s note, Yahoo would pay $5.4 billion in taxes, versus $13.3 billion in taxes if it spun out Alibaba – potential savings that amount to $8 billion. That’s an extra dollar back for each share outstanding. Yet, interestingly, the stock lost 45 cents a share Wednesday.
Yeah. NYT is not exactly intelligent when it comes to finance or anything technical. Not one mention of the mess that is happening in China moving prices up and down.
> Yahoo shares rise as board meets and considers sale of Web business
With Yahoo exploring a separation of its core business, the world may soon know what the company — minus its lucrative stake in Alibaba — is worth.
As of Wednesday, that figure is a negative (yes, negative) $13 billion.
How can a company that has $4.5 billion in revenue and one billion users be worth less than zero?
Let’s walk through the numbers.
The value of Yahoo’s stake in Alibaba is $32.5 billion and its stake in Yahoo Japan is $8.6 billion. The company’s net cash — or cash minus debt — is $4.2 billion. All told, that is $45.3 billion.
But stock market investors are assigning a valuation of $32.5 billion, based on Wednesday’s trading. The news that Yahoo was halting a spinoff of its stake in Alibaba, the Chinese e-commerce giant, choosing instead to explore a spinoff of Yahoo’s core Internet operations plus its stake in Yahoo Japan, sent shares lower, widening that gap.
On average, analysts value Yahoo’s core based on five times projected Ebitda – some a little higher, some a little lower. That yields a market capitalization of $4.6 billion if Yahoo were an independent company. Tack on the 35 percent stake in Yahoo Japan, worth about $8.6 billion, and you’ve got a $13.2 billion business that could be spun out.
If the transaction ultimately is taxed, the bill would be a lot smaller for the Yahoo core plus Yahoo Japan entity than the original plan to spin off its Alibaba stake. Assuming a 41 percent tax rate, as CRT did in Wednesday’s note, Yahoo would pay $5.4 billion in taxes, versus $13.3 billion in taxes if it spun out Alibaba – potential savings that amount to $8 billion. That’s an extra dollar back for each share outstanding. Yet, interestingly, the stock lost 45 cents a share Wednesday.