NEW YORK (TheStreet) -- There's probably no one in Corporate America who is more respected for his financial prowess than John Malone, the billionaire who controls Liberty Media (LMCA) and all but created commercial cable-television. Along with Liberty CEO Greg Maffei, Malone is known to employ ridiculously complex transactions to unlock value for his assortment of media and entertainment companies, all the while avoiding nettlesome taxes.
Many -- including me -- have wondered what someone like Malone would do if he was in charge of Yahoo! (YHOO) . There's a lot of potential in Yahoo! today, which is a nice way of saying that its collection of assets have been mismanaged for years by its assortment of directors and CEOs.
What would John Malone do with Yahoo! if he ran it? We can't know for sure, but let me make some guesses.
Must Read: Warren Buffett's Top 10 Dividend Stocks
Barron's wrote an interesting article a couple of weeks ago talking about how Liberty Ventures (LVNTA) had recently spun off its 22% stake in TripAdvisor (TRIP) to its holders. This transaction was tax-free, thanks to a ruling by the Internal Revenue Service. In doing this, it also put an operating asset (BuySeasons) into the new entity called Liberty TripAdvisor Holdings (LTRPA) , which is now worth about $2.5 billion.
At the moment, TripAdvisor has a market cap of $13.2 billion, meaning a 22% stake is worth $2.9 billion. Liberty TripAdvisor has a market cap of $2.5 billion today, so there's about a 16% discount between the spun-off value and the "true" value of the stake.
But it's worth it for Malone to have this stake as a separate entity. He can borrow against its value if he wishes. He also takes it away from mixing it up with other Liberty-owned assets that might disguise the overall value of the collection of assets. He forces the market to assign proper values to his individual assets.
He's also planning to do this with the stake he owns in Charter Communications (CHTR) in the coming weeks.
Today, Yahoo!'s stock encompasses the core business of Yahoo!, the cash that sits on its balance sheet (probably over $10 billion now thanks to last Friday's Alibaba (BABA) stake sale in the initial public offering), Yahoo!'s remaining 16.3% interest in Alibaba, and its 35% stake in Yahoo! Japan.
If Yahoo! spun off its Alibaba stake in a similar fashion to Liberty TripAdvisor (with a similar discount to the underlying Alibaba), the tax-free value of that spun-off company would be worth $30 billion. If it did something similar with the Yahoo! Japan stake, it would be worth $6.5 billion (after assumed discount to the underlying value).