Investors Value Yahoo's Core Business At Less Than $0 150
An anonymous reader writes "Yahoo is most known for its search, email, and news services. But its U.S. web presence is only part of its corporate portfolio. It also owns large stakes in Yahoo Japan and Alibaba (a web services company based in China). Yahoo Japan is publicly traded, and Alibaba is heading toward an IPO, so both have a pretty firm valuation. The thing is: when you account for Yahoo's share of each and subtract them from Yahoo's current market cap, you get a negative number. Investors actually value Yahoo's core business at less than nothing. Bloomberg's Matt Levine explains: 'I guess this is fairly obvious, but it leads you to a general theory of the conglomerate discount, which is that a business can be worth less than zero (to shareholders), but a company can't be (to shareholders). ... A fun question is, as fiduciaries for shareholders, should Yahoo's directors split into three separate companies to maximize value? If YJHI and YAHI are worth around $9 billion and $40 billion, and Core Yahoo Inc. is worth around, I don't know, one penny, then just doing some corporate restructuring should create $13 billion in free shareholder value. Why not do that?'"
Wait... Yahoo still exists? (Score:1, Insightful)
Weird.
News flash: Marissa Mayer is useless. (Score:3, Insightful)
Has anyone has believed Yahoo! post Mayer's 'strategy' is anything but biding time for the inevitable shutdown or way below cost acquisition?
Comment removed (Score:5, Insightful)
shell game (Score:4, Insightful)
Re:Shareholders know less than nothing (Score:5, Insightful)
Karl Marx called and wants his theory back.
Businesses may in theory work to maximise long term profitability, but in practice they are run by risk-averse humans who have finite lives and finite needs. So the ultimate drive is always to gut, reap, and run.
Doesn't valuation work the other way around? (Score:5, Insightful)
Namely, don't you value Alibaba based on the size of Yahoo's investment (plus a multiple for future growth), rather than using that investment to gauge how much the investor is worth?
Yahoo does make money. (Score:4, Insightful)
I find it so odd that people keep dismissing yahoo because it is not cool.
1. Yahoo actually makes money.
2. Yahoo has a lot of users.
3. Some services like Yahoo mail are still very popular.
I use Gmail as may main account and outlooks as my professional webmail. I use Yahoo mail as my signup email but that is only just habit for me. Yahoo mail is not bad at all IMHO.
For techies Yahoo is history but for a lot of normal users it is still relevant. I am very techie but I still use my.yahoo page as a start page for me.
Re:Doesn't valuation work the other way around? (Score:4, Insightful)
Of course. I have no idea where you'd get the idea it's done the other way around.
Just check out TFA, for example. Alibaba is currently estimated to be worth about US$153 bln. That is based on their IPO work and other analyses, and has nothing to do with Yahoo's stake in the company as such. So the 24% of Yahoo in that comes to almost $37b (which happens to be just a little less than the total market cap of Yahoo itself). That's how this valuation of Yahoo's stake is done, not the other way around.
Re:Ummm... (Score:5, Insightful)
And this is why we don't call this math... but rather "making shit up" to get money out of people.
Re:Shareholders know less than nothing (Score:4, Insightful)
There is literally nothing to be gained by splitting the company up except fictional paper valuations.
This is why the question posed by TFS is silly:
A fun question is, as fiduciaries for shareholders, should Yahoo's directors split into three separate companies to maximize value?
As Yahoo's directors, its directors should do whatever aligns with the company's goals. If that goal is "make numbers look happy", then sure, they can do that. If their goal is to (re)build a single strong business, they should keep it together. The common notion that financial "shareholder value" is all-important, or somehow a required priority, is ridiculous.
Re:Ummm... (Score:4, Insightful)
Yes, and this is how the world is ruled at the moment...
Re:Shareholders know less than nothing (Score:5, Insightful)
Yahoo's directors MUST (not "should") do whatever maximizes profit for shareholders. This isn't an opinion, nor what's socially correct, but those are the rules when you issue shares to the public on U.S. stock markets.
That's wrong in a couple of ways. What's legally required is that the board member put the shareholders interests above their own personal interests (fiduciary responsibility). But those interests are defined by the corporate charter, and to a large extent by the board itself. It's perfectly legal to create a publically traded corporation that sets social responsibility, or green blah blah blah, or some other such hippie nonsense above profit, and then that's what the board must pursue. You might struggle to get investors, or you might find a welcome market, but in any case it's allowed (and rarely happens).
More commonly, there's no requirement at all for the board to chase short term profit. That's where most the corporate infighting comes. Some corporations have firm 20 and 50 year growth plans, and sacrifice the short term for those plans, and sometimes those companies have a shareholder revolt because the owners lose patience and want everything monetized now. Sucks when that happens, but the downside of being a publically traded corporation is that you're ultimately controlled by your owners, and that can end up being anyone.