Yahoo Inc’s prized investment in Chinese Internet company Alibaba Group (阿里巴巴集團) has abruptly turned into a stock market millstone.
The weight drove down Yahoo’s stock by US$0.62, or 3.6 percent, to close on Friday at US$16.55. It marked the third straight session that the stock has fallen because of Alibaba worries. The sell-off has reduced Yahoo’s market value by about US$2.5 billion, or nearly 11 percent.
The reason: A surprise disclosure by Yahoo on Tuesday that Alibaba had spun off its online payment service, Alipay (支付寶).
The split caused investors to re-evaluate the value of Yahoo’s 43 percent stake in Alibaba, one of China’s most powerful Internet companies. To make matters worse, public bickering over the timing and handling of the Alipay spinoff has brought the rocky relationship between Yahoo and Alibaba into sharper focus. The dispute adds to the uncertainty about whether Yahoo will be able to make as much money from its Alibaba investment as analysts once thought.
The dustup also provides another reminder of the difficulties that face US companies as they try to profit from China’s Internet market. Frustrated in its attempts to build its own business in China, Yahoo decided instead to keep a toehold in the country through a US$1 billion investment made in Alibaba six years ago.
It looked like a smart move as Alibaba thrived through its various divisions, which include e-commerce sites Alibaba.com, Taobao (淘寶) and Yahoo China. Alibaba’s success has helped bolster Yahoo’s stock as Yahoo’s own operations have struggled in recent years.
Some analysts believe Yahoo’s Alibaba investment and a 35 percent stake in Yahoo Japan are worth US$8 to US$10 per share, accounting for about half of Yahoo’s current market value. In a Friday research note, Gleacher & Co analyst Yun Kim estimated that Yahoo’s indirect stake in Alipay was worth about US$0.65 per share, or about US$850 million. Yahoo said it hopes to be compensated for the loss of Alipay.
Alibaba CEO Jack Ma (馬雲) has become more antagonistic since Carol Bartz, a brash Silicon Valley veteran, became Yahoo’s CEO in January 2009.
Alibaba turned over Alipay to another company controlled by Ma. Alibaba said it wanted to ensure that the payment service complied with laws requiring it to be owned by Chinese. With Alipay under his control, analysts believe Ma could have more negotiating power if Yahoo tries to sell its stake in privately held Alibaba.
Yahoo said that the Alipay transfer occurred in August last year, but that it wasn’t notified about it until March 31. Alibaba disputed the timing in a statement on Friday. Alibaba said Yahoo’s board, which includes Yahoo co-founder Jerry Yang (楊致遠), had been informed of the ownership change 13 months earlier during a July 2009 meeting.
Yesterday, Ma said the firm’s move to transfer ownership of its online payment unit was “legal and 100 percent transparent.”