Yahoo just put out a press release to say it’s reached a deal with Alibaba and Softbank on Alipay.In May, one of Yahoo’s Asian assets, Alibaba Group, announced it had sold controlling interest in Alipay to Jack Ma – without Yahoo’s knowledge.
Yahoo failed to announce it during a quarterly earnings call.
Many on Wall Street had decided Yahoo’s Asian assets were a huge part of the company’s value. After the Alipay mess, some of them changed their mind, and shareholders punished the company.
Details of today’s deal are sparse, but the company is holding a conference call at 8:45 AM.
US dial-in number:
1 866 953 6858
International direct dial-in number:
+1 617 399 3482
Passcode: 769 472 53
We’re listenining to the call now. Notes:
8:50 On the call: Tim Morse, Yahoo! CFO; Joe Tsai, Alibaba Group CFO; and Ron Fisher, President of SoftBank Holdings Inc. Fisher isn’t talking, though.
8:50 Tsai is giving an overview of Alibaba Group. He says Alipay has provided a payment infrastructure for TaoBao. It’s only marginally profitable because that’s basically all it does. It just opened to third-parties in China, though, and that could be a big business. It isn’t yet.
8:51 Even though its selling Alipay, Alibaba will have cheap access to Alipay and access to some of its intellectual property.
8:53 Tsai is getting to the details. Alipay will continue to provide payment services to TaoBao and other Alibaba Group companies on a preferential basis. Alibaba Group and its shareholders are protected from any value diminishment, he says.
8:54 Alipay will issue Alibaba Group a $500 million promissary note. Prior to a liquidity event, Alipay will pay Alibaba 49% of its value. Alibaba will receive a $2 billion to $6 billion payment if Alipay IPOs. That’ll be determined by taking equity value of Alipay and multiplying it by 37%.
8:58 Q&A time.
9:01 Tsai says he’s not expecting a Alipay liquidity event any time soon.
9:02 Shareholders are angry that the deal caps Alipay’s upside.
9:05 Tsai says its too early to think about an IPO of Alipay. He says Alipay fully supports Alibaba Group on preferential terms, so it’s not a great business right now. It doesn’t have much outside business. But it’s excited about the opportunity in China.
9:08 Shareholder wants to know: how do we know this isn’t going to happen to TaoBao – where Yahoo owns something one day, and the next it only gets 37% of an IPO? Tsai says Alipay’s new ownership has to do with China’s regulations over the payment industry. TaoBao won’t have that kind of problem because its just ecommerce, he says.
9:13 The tone on this call is angry.
9:14 An analyst wants to know what the “preferential terms” Alibaba Group is getting from Alipay. TaoBao will pay Alipay processing fees, its merchants will not. So that’s a subsidy to merchants, says Tsai.
9:19 This is a 50 year deal with an automatic renewal after 50 years, says Morse.