An update from Eric Jackson: The Wall Street Journal reported a "scoop" overnight that Yahoo! could potentially save billions on disposing of its Asian assets through something called a "cash-rich split." I first reported on this structure for TheStreet six weeks ago, as it had been actively pushed as a viable option by shareholders (including me) to the intransigent board since the summer.
The hounds have been circling the prey. There's clearly a lot of value embedded within Yahoo!'s core business, its stake in Alibaba Group and in its stake in Yahoo! Japan.
However, there are many misconceptions shared in the mainstream media, including the venerable Wall Street Journal, surrounding some aspects of how value might be unlocked. Let me correct these misconceptions.First, let's talk about if Microsoft (MSFT) or any other company was to swallow Yahoo! whole. Some have speculated that such a move would trigger a change-in-control clause that's part of the 2005 investment between Yahoo! and Alibaba Group. If that was true, Alibaba Group (or stakeholder Softbank) could object to such a deal and have a "right of first refusal." That would lower the value of Yahoo!'s 40% stake in Alibaba Group. Yet, I've spoken to investors in both Microsoft and Yahoo! -- some of whom have spent a lot of money on multiple law firms to go through the agreements -- and they are firmly of the opinion that this view is false. When Microsoft proposed acquiring Yahoo! back in 2008, a "change of control" clause would not have been triggered because Yahoo! would not have ceased to exist. The company would have continued as an operating entity under Microsoft. Microsoft would have gained full access to the Alibaba Group (and Yahoo! Japan) stake. Jerry Yang would have remained on the board. Yahoo! would still have the right to appoint a fifth member to the Alibaba Group board. >> Keep the stock market at your fingertips with TheStreet's iPad app.
The Tax FalloutThe second misconception is around what the tax implications are for Yahoo!'s stake in Yahoo! Japan and Alibaba Group. Several media reports have indicated that these tax issues are weighing on Yahoo!'s ability to spin off or dispose of these assets. If Yahoo! has any plan to dispose of its Alibaba Group stake, they certainly haven't said anything along those lines, even though I've spoken out in favor of them selling 10% of their stake (4% of Alibaba Group overall). However, Yahoo! has been talking about unloading their stake in Yahoo! Japan since at least January -- and yet, they haven't done it, frustrating investors.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV