All Financial Wisdom

Yahoo’s Marissa Mayer and the Stake in Alibaba

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Yahoo (YHOO) currently holds a 15% stake in Alibaba (BABA), the Chinese internet giant that had their IPO in September.  Their stake is worth nearly $37 Billion and they are set to make a decision in the next 10 days about what to do with it. [Yahoo Tech]

Yahoo's CEO Marissa Mayer has been on an acquisition strategy and has purchased 18 companies just in 2014 [List of Mergers].  This strategy is costly since you typically have to pay a premium and then trim expenses once they become a part of Yahoo.  Depending on what her plan is about the stake in Alibaba, she might be on the hot seat if it isn't a good idea.  She also might be praised if it is.  Either way, I would expect lots of volatility with her stock over the next week.  Rumors are sure to come out and more and more talk will be about her options.

Some possible ideas of what to do with the money:

  • Buy more promising companies in emerging markets.  They struck gold with Alibaba, but can they struck gold again?
  • Buy back stock.  They have been doing this a lot recently and it seems other competitors have been executing similar strategies.
  • Increase dividends.  With all that extra cash, increase the dividend to distribute the cash to investors.  They will make some happy.  On the other hand, this might also come across that Yahoo is done growing and doesn't know how to grow their profits.
  • Keep the investment.  Yahoo could keep the investment in Alibaba and be an active investor.  They could help Alibaba extend their reach in the United States and Europe, two markets where Alibaba isn't known for.
  • A combination of all of the above.  $37 billion is a lot of money, every for such a large corporation like Yahoo.  They can put a multiple step plan to cover all of their bases.

What do you think Yahoo should do with their Alibaba stake?

References:

https://www.yahoo.com/tech/s/yahoo-ceo-poised-fateful-decision-082145154.html

http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Yahoo!

2 Comments

  1. Dr. Jamshir Ali

    March 29, 2015 at 8:12 am

    I suggest diversification is the immediate answer. Yahoo, however, must come up with a growth strategy and tap into new zones that have been thought of by its competitors.

  2. Dr. Jamshir Ali

    March 29, 2015 at 8:14 am

    I suggest diversification is the immediate answer. Yahoo, however, must come up with a growth strategy and tap into new zones that have not been thought of by its competitors

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