Yahoo’s Core Business Value Cut in Half to $6.8 Billion After Alibaba IPO

As Alibaba shares soared in their first day of trading on Friday, the value that investors are placing on Yahoo YHOO -2.82%’s core business was sliced in half to about $6.8 billion. That’s because Yahoo still owns a large chunk –about 400 million shares — of the e-commerce giant after the IPO. Alibaba’s shares rose 38% on Friday, while Yahoo’s shares fell about 2.7%, so even more of Yahoo’s market capitalization is made up of non-core assets. Yahoo made about $5.1 billion in cash, net of taxes, from the sale of shares in the Alibaba IPO. Its remaining stake is valued at about $23.4 billion, presuming it will be taxed at the full capital-gains rate of 38%. Add that to a stake in Yahoo Japan 4689.TO -1.35% worth about $5 billion, and net cash of about $1.55 billion, and Yahoo’s non-core assets now total about $35 billion. With Yahoo’s market capitalization at $41.86 billion, the value that investors are placing on the core business – the entire empire of media sites, advertising, email, mobile apps and other Web properties like Tumblr and Flickr – sits at about $6.8 billion. That number was $13.85 billion at the IPO pricing, but it fell as Alibaba’s stock rose and Yahoo’s shares sank. A long list of factors could influence the value of Yahoo’s core business in the coming months. Chief Executive Marissa Mayer may look to use her new war chest on acquisitions that could accelerate growth and change investors’ muted outlook on the stock. Finance chief Ken Goldman is on the hunt for ways to avoid paying the full tax rate on the remaining Alibaba shares. If the run up on Alibaba’s stock continues, and Yahoo’s stock sags, the value of its core business could dwindle to nothing at all. --Source : blogs.wsj.com