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Yahoo! Inc. (YHOO) Is Only As Good As Reverse Morris Trust: John Brubank

Enthusiasm for Yahoo! Inc. (NASDAQ:YHOO) has increased after the company’s Earnings Release and many critics of Marissa Mayer, Yahoo!’s CEO, have been silenced. However, John Burbank, founder and CIO of Passport Capital, who is still long in Yahoo!,  finds little reason in changing his negative view of Mayer’s management.

Alibaba Group Holdings Ltd (NYSE:BABA)

On CNBC, he mentioned that the only reason why his fund still owns Yahoo! Inc. (NASDAQ:YHOO) is because of the tax efficiency that could play in, when the company liquidates its assets in Alibaba and Yahoo! Japan. According to him, this could be done through the famous Reverse Morris Trust strategy.

Burbank was of the opinion that the market was so hopeless of Marissa Mayer and Yahoo!’s board that they are not even willing to add this tax efficiency scheme into the company’s valuation. He also, dropped the name of John Malone in his comment, who was CEO of Tele-Communications Inc. for twenty four years.

“[…] If they have any tax efficiency with alibaba, the stock is undervalued. I guess I think what would John Malone do? If John Malone ran Yahoo! Inc. (NASDAQ:YHOO), the stock would be up a lot because they presume a reverse Morris Trust Separation of assets, you know, Alibaba tax free spunoff […],” said Burbank.

Many hailed Marissa Mayer last night, after the earnings report in which she mentioned that Yahoo! has a lot more cash in its piggy bank than the people thought. She said that Yahoo! Inc. (NASDAQ:YHOO) managed to buy back a substantial amount of its stock, when it was undervalued and they also sold a lot less of their Alibaba shares than they were supposed to, and hence saved a couple of billions there as well, $2.5 billion to round it off.

However,  Burbank made a good point when he said that Yahoo! Inc. (NASDAQ:YHOO)’s ineffficieny lies in making overpriced acquisitions that have failed to work for the company. All that cash hoarding that Mayer is carrying out is of no value, if it can’t be invested profitably. Hence, even after the earnings release, the only attractive feature of Yahoo! Inc. (NASDAQ:YHOO) for him is the tax efficiency that he thinks that the company is going to benefit from it in future.

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