NEW YORK (TheStreet) –– Yahoo! (YHOO) shares have slipped back into the red on the year, down 3.7%, after Bank of America downgraded it amid investor concern regarding what it might do with its mega-stake in Chinese e-commerce titan Alibaba (BABA) and the proceeds from Alibaba's recent initial public offering.
CEO Marissa Mayer has $8 billion she can return to shareholders but her style doesn't suggest she'll put the $5 billion haul Yahoo! executives can spend back in investors' pockets -- it's more likely that dough will head for M&A. The company is locked into Alibaba for the next year, and it won't unload more stock soon. Shares are down by 9% so far this week, as part of a bigger market selloff.
"It feels like most small and mid-cap Internet companies are possibilities," said one hedge fund analyst, who declined to be named. "Given the recent deal for Community, it seems she [Mayer] is desperate for content." The analyst owns Japanese-based Softbank -- which holds a stake in Yahoo! Japan, and not Yahoo! -- because "of the risk" of what Mayer might do once the company receives the cash infusion from the Alibaba stake sale.
-- Written by Jon Marino and Chris Ciaccia in New York
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