Yahoo announced on Tuesday that it's sold half of its 40 percent stake in Alibaba for a mixed bag of cash and preferred shares that will net it $4.3 billion after taxes and fees.
Aquiring 40 percent of Alibaba, a leading Chinese Internet company, back in 2005 is one of the smartest business moves Yahoo's made over the years. But as time passed it became increasingly clear that there were few if any meaningful business benefits to the cross ownership. There was just Yahoo the operating entity, and then Yahoo the holding company that owned a valuable stake in Alibaba. A key part of the current Yahoo leadership's plan for turning the company around is to unwind the Alibaba relationship and put that value to use. In particular, 85 percent of the money is going to be kicked out to Yahoo shareholders while the remaining 15 percent can be reinvested in Yahoo's core businesses. As a bonus the transaction should end up netting a pretty large amount of tax revenue for the U.S. government, since unrealized appreciation of a large ownership stake in a Chinese company isn't taxable, but these dividends will be.
Half of Yahoo's remaining stake will be liquidated when Alibaba does its IPO, and the rest will be sold off later after the decent interval provided by the post-IPO lockup period.
TODAY IN SLATE
Ben Bradlee Dead at 93
The legendary Washington Post editor presided over the paper’s Watergate coverage.
This Scene From All The President’s Men Captures Ben Bradlee’s Genius
Renée Zellweger’s New Face Is Too Real
Sleater-Kinney Was Once America’s Best Rock Band
Can it be again?
Whole Foods Is Desperate for Customers to Feel Warm and Fuzzy Again
I’m 25. I Have $250.03.
My doctors want me to freeze my eggs.
Forget Oculus Rift
This $25 cardboard box turns your phone into an incredibly fun virtual reality experience.