Yahoo! Inc. (YHOO) — and, by extension, YHOO stock — hasn’t been this interesting in probably 20 years, but not for the right reasons.
Indeed, the web portal’s future has never been in such doubt. Flummoxed by the Internal Revenue Service on its tax-free plan to spin off its vastly valuable stake in Alibaba (BABA), YHOO doesn’t seem to know what to do.
On Friday, activist investor Starboard Value once again renewed its call for Yahoo to sell its core business, rather than risk taking a huge tax hit on a BABA spinoff.
Such a move would presumably look something like AOL‘s exit from the public market. It would also be something of an unexpected end for the venerable tech name. Selling the core business — mail, messaging, the whole of what makes YHOO Yahoo — would finally put an end to the long list of failed turnaround tries.
More importantly, who would want it, and what would they be willing to pay. The rump Yahoo — comprised of the BABA stake and whatever else Yahoo sticks in there — will take most of Yahoo’s value with it. Heck, if you add up the BABA stake and Yahoo’s share of Yahoo Japan, the core business has an implied value of zero.
At this point, reports are swirling as the board of directors conducts its annual extended meeting, and all of the members have indicated just how tough it is to decide what to do with the BABA stake — and, by implication, CEO Marissa Mayer’s future with the company.
Uncertainty Abounds in YHOO Stock
As for other solutions to this perplexing problem, there don’t appear to be any. The Wall Street Journal reports that Alibaba would be willing to buy back its stock from Yahoo — but only at a steep discount. As for the core business or Yahoo Japan, BABA has no interest because, well, they’re terrible.
It sounds like Yahoo is at an impasse; some reports suggest it will simply delay the BABA spinoff, and that makes Yahoo stock even riskier than usual.
Pretty much everything about this company, from the CEO to its very future, has never been more uncertain. As much as it’s a cliche, it’s true: The market hates uncertainty.
If the board does indeed merely delay the spinoff, that would be very much in the Yahoo tradition. The company has been punting on the big decisions and going nowhere for years.
As fascinating as this YHOO soap opera is, retail investors would do well to just sit back and watch.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
