Don’t Bet on Alibaba Buying Yahoo’s Internet Business, WSJ Reports

The Wall Street Journal reported on Tuesday that Yahoo’s board will meet several times this week, during which the company’s directors will consider whether to sell Yahoo’s lucrative stake in Alibaba, the company’s core Internet business, or both. These sessions are set to begin Wednesday and carry on through Friday, according to these sources. Since that includes the company’s Alibaba and $8.5 billion Yahoo Japan stakes, investors have valued Yahoo’s core business as essentially worthless. And Recode’s Kara Swisher downplays the original WSJ report and writes that the Yahoo board is actually going to be backing the embattled Mayer and focusing on the company’s planned Alibaba spinoff.

The November letter from Starboard referred to “numerous conversations and meetings” held privately with Yahoo in the past year, and the activists’ growing frustration with the company’s reluctance to adapt its plans as Yahoo’s shares – and Alibaba’s – have declined. Yahoo failed to get prior approval of its plan from the Internal Revenue Service, raising the risk that the agency could later challenge the spinoff’s tax-free status. Yahoo has said it wants to proceed with the deal anyway, and close it this month.

Around 300,000 Yahoo stocks have been sold at a price ranging from $35.60 up to more than $36 in the after hours trade.

That would mean investors are valuing Yahoo’s core business at less than zero if the Asian assets were spun out tax-free. That Mayer is now said to be considering the plan is indicative of the pressure she’s found herself under.

After such a sale, all that would be left, essentially, is the Alibaba and Yahoo Japan stakes. And under her leadership, the company acquired microblogging platform Tumblr for $1.1 billion and fashion startup Polyvore for about $200 million – but neither have proven their value as yet. Under the rule of Ms. Mayer, company tried its level best to drive the latest turnaround effort. Her appointment from Google was seen as a major coup for Yahoo after years of turmoil, but the core search and website business has stuttered, with Ms Mayer’s main legacy being a string of expensive acquisitions.