Barron’s: liquidation could provide 20% gain to Yahoo investors
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Barron’s: liquidation could provide 20% gain to Yahoo investors

According to Barron’s, the weekly American newspaper owned by the Dow Jones Company, Yahoo could return as much as 20% gains to investors in the event of a liquidation. With the impending sale of its core business to Verizon Communications, and its possible future as an investment company under the name Altaba, Barron’s suggests that an assumption of “no change” to the value of Alibaba’s share price would mean healthy returns for investors.

Yahoo and Alibaba: similar performance, different price

barrons gph

SOURCE: Yahoo Finance

Dominion holds Yahoo as a way to gain discounted exposure to Alibaba, and has long extolled the virtues of the stock. Explaining why, Barron’s provided the following breakdown:

“Here’s the math on Yahoo: The company is expected to have about $10 billion of net cash following the Verizon sale, plus a roughly one-third stake in Yahoo Japan (4689.Japan) worth $9 billion, and the Alibaba interest worth $41 billion. That totals about $60 billion, or $63 a share.

The big unknown is the discounts that Yahoo will have to accept to liquidate the Alibaba and Yahoo Japan stakes. Assume that Alibaba swaps shares for the Yahoo! Alibaba stake at a 15% discount, and that Yahoo gets a 10% discount on the Yahoo Japan liquidation. That would give Yahoo a total value of around $56 a share.”

Disclosure

Dominion holds Yahoo in its Global Trends Ecommerce Fund. 


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