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Yahoo! Inc. (YHOO) and Alibaba Group Holding Ltd (BABA) Divorce Prolonged For 1 Year

Speculations on what Yahoo! Inc. (NASDAQ:YHOO) does from its proceeds from selling its stake in Alibaba Group Holding Ltd (NYSE:BABA) have lost traction as the company announced that those assets are frozen for at least a year. CNBC‘s Kayla Tausche reported the news while discussing its ramifications for Yahoo! Inc. (NASDAQ:YHOO) with Henry Blodget, Business Insider editor-in-chief & CEO.

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Tausche warned the audience not to get excited because Yahoo! Inc. (NASDAQ:YHOO) wasn’t announcing any Acquisition deal based on its newly acquired funds from Alibaba Group Holding Ltd (NYSE:BABA)’s IPO.

“[…] Don’t get too excited though because all it [Yahoo! Inc. (NASDAQ:YHOO)] really said in an 8 K filing last night was that the company has entered into a one year lock up agreement, restricting the sale of its remaining stake in Alibaba Group Holding Ltd (NYSE:BABA) […],” said Tausche.

Although Yahoo! Inc. (NASDAQ:YHOO) received some $8 billion from the sale of some of its stake in Alibaba Group Holding Ltd (NYSE:BABA) during the IPO but as Tausche pointed out, it cannot fund a major acquisition since half of these proceeds are promised by Yahoo to be distributed among shareholders.

This is actually bad news for Yahoo! Inc. (NASDAQ:YHOO) in at least two ways. Firstly, Yahoo might not be able to sell its stake at a premium that the market is currently offering for Alibaba Group Holding Ltd (NYSE:BABA)’s shares, and the price of Alibaba’s stock has been falling since its IPO. Who knows how low the stock price will be in a year?

Secondly, Yahoo! Inc. (NASDAQ:YHOO) needed to stay relevant in the eyes of investors who had bought the stock in hopes that through major acquisition Yahoo! Inc. (NASDAQ:YHOO)  will turn its ship around. Now that it’s not happening for at least a year, more investors could flee Yahoo! Inc. (NASDAQ:YHOO), thus exerting more downward pressure on the stock.

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