|Yahoo! divestiture talks continue amid Facebook IPO mania|
NEW YORK ( TheStreet) -- As Facebook ( FB - Get Report) mania grips investors from Silicon Valley to Wall Street on the social media network's first day of trading, battered tech pioneer Yahoo! ( YHOO) is continuing to explore ways to divest its Asian businesses. Bloomberg reports that Yahoo! is in talks to sell a 20% stake in Chinese e-commerce giant Alibaba for about $7 billion. Earlier on Friday, AllThingsD reported that Yahoo!'s newly reshuffled board is meeting today to discuss the sale and a potential one-time dividend payment to shareholders. The asset sale talks and management overhaul at Yahoo! come in a week highlighted by Facebook's IPO, and amid management change and shareholder ire at Yahoo!, underscoring a generational shift in Silicon Valley as a younger breed of social networks steal thunder from the tech old guard.
As Facebook shares gyrate with investors attempting to analyze the company's future growth prospects and valuation -- which stands at roughly 25 times its trailing 12 month revenue -- investors are asking that Yahoo! divest assets as a way to unlock value. Bloomberg's report of a $7 billion Alibaba sale on Friday is just the latest in a nine month run of speculation on how the Internet pioneer can monetize its Asian assets to unlock embedded value in the company's waning shares. Yahoo has previously come close to selling its Alibaba stake, a source told Bloomberg, but negotiations collapsed and a sale may be announced as early as next week. Separately, AllThindsD reported that the company may pay a dividend to frustrated shareholders if a transaction were announced. "We are pursuing a simpler transaction in order to monetize a portion of our Alibaba stake," former Yahoo! CEO Scott Thompson said on the company's recent earning conference call. Thompson also acknowledged there is a valuation gap with regard to Yahoo! Japan, and said that noting was imminent about monetizing that stake. In Friday trading, Yahoo! shares rose over 5% to $15.66 on reports of a possible asset sale and a dividend. Still, amid a continued process of considering strategic alternatives to unlock share value, Yahoo! shares are off roughly 2% year-to-date and in the past 12 months. That share surge was trounced in size and hype by the listing of Facebook, which launched the biggest internet IPO in history, dwarfing Google's ( GOOG) listing, and making it the third largest-ever IPO in the U.S. After pricing at $38 late on Thursday, Facebook shares opened at $42.05 and surged over 10% in its first trades, before re-testing its IPO price level of $38 on multiple occasions and roaming between $40 and $41 in midday trading.
Asset sale negotiations at Yahoo! come amid a fight with its largest shareholder, hedge fund Third Point that's overturned the company's board and management. Earlier in May, Daniel Loeb of Third Point revealed that Yahoo!'s former CEO Scott Thompson hadn't earned a computer science degree from Stonehill College and called for the newly appointed CEO to be fired along with key board members. Yahoo! heeded Loeb's call on May 14, replacing Thompson with interin CEO Ross Levinsohn, Yahoo's head of global media, and it nominated Fred Amoroso to be the company's chairman, replacing long-time board chair Roy Bostock. Yahoo! also settled a proxy contest with Loeb, taking on two directors nominated by Third Point, which holds over 5% of Yahoo!'s shares. In first quarter earnings in April, Yahoo! reported earnings of 23 cents per share on $1.08 billion in revenue. Analysts polled by Thomson Reuters were expecting earnings of 17 cents per share on $1.06 billion in revenue. Under Thompson's short tenure as CEO, Yahoo! laid off 2,000 workers in an effort to reorganize the business. Loeb, who was intent on a proxy contest for Third Point-elected board members, wanted a bigger focus on asset monetization. In April, the company gave stronger-than-expected second-quarter revenue guidance. It said it expects revenue excluding traffic acquisition costs (TAC) to range from $1.03 billion to $1.14 billion.. The Sunnyvale, Calif.-based Internet company company ended the first quarter with $2.65 billion in cash, cash equivalents, and investments in marketable debt securities. Yahoo! said it bought back 5 million shares during the quarter. Interested in more on Yahoo!? See TheStreet Ratings' report card for this stock. For more on Yahoo!'s struggles, see 10 steps Yahoo! can take to succeed. Also see what Yahoo! can learn from Warren Buffett for more on its management change. Check out our new tech blog, Tech Trends. Follow TheStreet Tech on your wireless devices. -- Written by Antoine Gara in New York >To submit a news tip, send an email to: email@example.com