Stock Market Watch

Alibaba and Yahoo Come to Terms

by ·


The four month long spat between Alibaba Group Holding Ltd. and its largest shareholders, Yahoo! Inc. (NASDAQ:YHOO) and Softbank Corp. has finally ended after the y reached an agreement regarding compensation of investors after the change in ownership of the fast growing popular online payment service in China.

The Alipay unit, previously owned by Alibaba was transferred to a company controlled by Alibaba’s chairman Jack Ma last year.  Alibaba may gain as much as $ 6 billion if the shares of Alipay go public as according to the statement. Alibaba will be getting 49.9 percent of Alipay’s earnings before any sale.


This deal will reduce the ownership of Alibaba, Yahoo and SoftBank in the fast growing internet business. The shares of Yahoo has gone down by 27 percent since may until yesterday and it is a cause of major concern as the future of United States based Yahoo in the booming Chinese market is at risk . Yahoo said that it was not informed of the August 2010 transfer of Alipay until the month of March 2011.

Clayton Moran, an analyst at Benchmark Co. based in Boca Raton, Florida said that the fear in the market about Yahoo getting diluted  is about to be realized. Clayton Moran recommends holding of the stock.

Sunnyvale, California based Yahoo! Inc. fell by 2.5 percent or 34 cents to $ 13.16 on the NASDAQ stock market. According to a statement, in any case of liquidity event or an Initial Public Offering at Alipay, Alibaba will get around $ 2 billion. .

Before transferring Alipay to Jack Ma owned company, Alibaba owned 100 percent of the shares and was raking in all of its profits. This agreement reduces the ownership as well as earning’s share said an analyst with JPMorgan & Chase, Doug Anmuth who also rated Yahoo as neutral in a note.

Alipay will be continuing the payment services to Alibaba on preferential terms, said the companies in a statement. The patents and technology will be licensed to Alipay by Alibaba for which Alipay has to pay royalties.

While talking in an interview with the China Entrepreneur magazine earlier this month, Jack Ma had said that Yahoo, Softbank and Alibaba will be compensated well for the loss of their Alipay unit. He also said that the necessity of reorganizing Alipay to comply with Chinese regulations was discussed by Alibaba’s board for almost 3 years and the spinoff was legal and transparent.

More Posts by this author

Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


Tags:

Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

You may also like...