Yahoo! Is Now Officially Worth Less Than Nothing, Say Matt Yglesias and Matt Levine
AS two different people have now noted, Matt Yglesias and Matt Levine, Yahoo is now officially valued at less than nothing. Which, for a company that has a $40 billion price tag on the markets is a pretty strange thing to try and say. But it also happens to be true.
The conundrum is explained by the fact that there are really two different things here. One is the business that makes up Yahoo, the other the company that owns that business. And that company owns not just the business Yahoo but also good sized chunks of two other businesses, Yahoo Japan and Alibaba, a Chinese internet company (not unlike Amazon). If we take the value of Yahoo the company and subtract from it the value of the stake in Alibaba then we get a negative number. Take away the value of that stake in Yahoo Japan and it becomes even larger.
So, when we’ve done this we can note that Yahoo the company is indeed worth some $40 billion. But after the subtraction Yahoo the business seems to be worth some minus $13 million or so (and that’s without even thinking about the amount of cash the company has).
There’s two reasons for this. The first being that there’s a bit of uncertainty about how to value Alibaba. It’s coming up for an IPO soon and we’ll have a better idea after that. But the other reason isn’t quite so simple. For it’s that, OK, sure, Yahoo is about to get large amounts of cash for that Alibaba stake (or some of it). But the market is thinking that they’ll just piss it away on doing not very much. Therefore, given that the cash is likely to be wasted there’s no real value there anyway.
And that’s really a downvote, a vote of no confidence, in the ability of Yahoo’s managers.