Boston, MA 09/22/2014 (wallstreetpr) – From the very day, Alibaba Group Holding Ltd (NYSE:BABA) has launched its IPO, it has been touching new heights. According to a recent report, it has put adverse effect on Yahoo! Inc. (NASDAQ:YHOO) as the core business value of the company is down to $6.8 billion, almost 50% of its actual worth.
Reasoning behind this drop:
The main reason behind this unpredictable drop is nothing but Yahoo! Inc. (NASDAQ:YHOO)’s holding of close to 400 million shares of the e-commerce giant after the IPO. Alibaba Group Holding Ltd (NYSE:BABA)’s shares surged by an eye-popping rate of 38% on Friday, while YHOO fell about 2.7%; therefore, a large part of market capitalization of YHOO is made of non-core assets. Recently YHOO made around $5.1 billion in cash after deducting taxes by selling BABA’s shares in the IPO. Now it is left with another $23.4 billion worth of shares, which will be taxed at capital gain rate of 38%. If this stake of BABA’s shares is added into YHOO Japan’s stake worth $5 billion and net cash proceedings of close to $1.55 billion, then non-core assets of YHOO go up to $35 billion.
Total capitalization of YHOO is close to $41.86 billion, while the core business value that investors have come up with is around $6.8 billion including various businesses such as advertising, media business, mobile apps, email business, Flickr and Tumbler, etc. The value was numbered $13.85 billion at the time of Alibaba Group Holding Ltd (NYSE:BABA) IPO, but it fell suddenly as BABA’s shares took off very fast, while YHOO shares sank. A lot of factors may affect YHOO’s growth in coming months. According to market experts, Marissa Mayer, Chief Executive Officer of YHOO may look forward to executing its old strategy to acquiring different businesses in order to enhance the value of the business and get investors’ attention. Meanwhile, Ken Goldman, Financial Chief of Yahoo! Inc. (NASDAQ:YHOO) is looking forward to new ways to avoid heavy tax payment on remaining BABA shares.
