So current investors will get stock in Yahoo-Alibaba, a company that exists only to own Alibaba stock, and then they can sell their stock in that new company as if it they owned the Alibaba stock itself?
Yes which sounds stupid until you realize they didn't own "Alibaba stock itself," Yahoo did. Yahoo could've used that money as it wished but activist investors held Mayer's job as ransom, and she just payed in full.
To be fair, the market put such a small premium on the non-Alibaba value in Yahoo largely because they weren't confident that Yahoo wouldn't just squander it.
Yahoo's purchase of Tumblr for nearly a billion dollars is a great example. That asset will likely never give Yahoo a return.
That's because investors look at Yahoo as a holding company, with 3 main components : Alibaba, Yahoo Japan and Yahoo (USA/Rest of World). It's quite normal that the value of the holding company is (far) below the sum of its parts. There are multiple reasons for this discount: assets are less liquid, overhead costs, management risks, taxes, etc.
Most company have intangible assets and/or liabilities whose valuation is less-than-concrete that aren't traditionally reflected on a balance sheet except when they are given a concrete valuation as "goodwill" in the event of acquisition of the company.
These assets and liabilities exist all the time, though. In the case of a publicly traded company where the market cap is substantially less than the book value -- concrete assets less concrete liabilities -- there is a judgement that these fuzzy assets and liabilities aggregate to a net liability. That's a sign of perceived distress, but not really rare.
Its even less rare for a company to be valued less than its (concrete) assets -- this is fairly normal. That just means that the net positive goodwill is less than concrete liabilities.
only if count the assets (i.e. stocks) at face value.
if you did that, you can just go to any stock market and buy any stock. any. without ever even knowing which company they are for. it is the same reasoning. If you think yahoo has 50b in cash because it has stock of other companies valued at 50b, you can just buy 50b of any company and you will have 50b? probably you are going to have 50b-+(market fluctuation) which is what nobody wants to bet on so easily.
it's ironic because technically Yahoo and their acquisitions are sound. Flickr is still one of the best looking photo sites around, and from what I hear from my Photography friends performs like a champ. Tumblr likewise is a good technological investment. I think the failure has been turning good technology into money, which is where a lot of companies fail. The beauty of Flickr and Tumblr are ruined as soon as you start heaping crap tons of banner ads on every page. But that said you still have to find a way to generate revenue from those investments.
A couple of others that stand out: GeoCities, Zimbra (Yahoo bought it for $350 Mil, sold it to VMware for less who sold it down the road as well), etc.
