Yahoo’s stock continues to get slammed on the news that the Alibaba Group no longer owns Chinese payment company Alipay.The most disconcerting thing about the news is that Yahoo’s management cluelessness about what was happening with the Asian asset.
Considering Yahoo is basically viewed as a holding company for Asian internet companies, it’s extra important for it be on top of what’s happening with Alibaba.
Macquarie analyst Ben Schacter spoke with Yahoo management yesterday and says they were “surprised” by what happened, but they’re trying to negotiate some way to get fair economic value for they’ve lost.
Good luck getting fair value, says Schacter: “YHOO is in the position of negotiating the value of an asset that it no longer owns (and negotiating with a party with whom it has a strained relationship).”
If you’re just tuning into this story, Yahoo owns a big piece of Chinese internet giant Alibaba. Alibaba had owned Chinese online payment company Alipay until August when it sold the company. It apparently didn’t tell Yahoo it was selling off Alipay.
Yahoo found out on March 31, but didn’t disclose the news on its earnings call which was three weeks later. Yahoo says it was trying to get more information, but Schacter called it “a serious communication failure.”
The big problem here is that every bullish case on Yahoo revolved around the Chinese assets. After this episode, it’s clear that Yahoo has little, if any, control over those assets and what will happen with them.
The whole episode is just a ugly cloud over Yahoo, which was showing some signs of life with its core display ad business starting to bounce back.