Yahoo! Inc. (NASDAQ:YHOO)’s stock is on every investors’ radar, owing to the upcoming IPO of the Alibaba Group. Yahoo! Inc. (NASDAQ:YHOO) is a major shareholder in the Alibaba Group, and based on the valuation that the Street is expecting the Alibaba Group to debut, Yahoo’s stake could be worth in upwards of $40 billion. It’s important to remember that Yahoo! Inc. (NASDAQ:YHOO)’s current market cap also comes at near $40 billion, which basically means that the Street is valuing Yahoo’s core business to be worth almost nothing. Patrick Armstrong, CIO of Plurimi Investment Managers, discussed today on CNBC, what makes Yahoo! Inc. (NASDAQ:YHOO)’s stock, such a lucrative buy right now.
“Yahoo has got a market cap of just under $40 billion, they have got 22.5% stake in Alibaba. Post the IPO, once it starts trading on the market, you have probably got Alibaba at $180 billion, if you just do the math on that Yahoo is worth its stake in Alibaba, You have got $9 a share in Yahoo Japan, it’s sitting at $4 billion in cash,” Armstrong said.
The main point that Armstrong highlighted was that Investment banks are not going to ask investors to take positions in Yahoo! Inc. (NASDAQ:YHOO) if they want an exposure to Alibaba Group as when investors are going to buy shares in the Alibaba Group on IPO, the investment banks are going to pocket 5% of that transaction. Armstrong believes that if investors buy Yahoo’s stock at current prices, they are basically buying shares of the Alibaba Group while getting every business and asset that Yahoo! Inc. (NASDAQ:YHOO) owns for free.
As of June 30, 2014, D.E. Shaw‘s firm D.E. Shaw owns over 16 million shares in Yahoo! Inc. (NASDAQ:YHOO) , making it one of the largest shareholder in the company.