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Yahoo! Inc. (YHOO)’s Plan Regarding Proceeds From Alibaba Group Holding Ltd (BABA)’s IPO

Yahoo! Inc. (NASDAQ:YHOO)‘s investors have been scatching their heads over what their company is going to do with the $6 billion cash that it is going to be doled out after the sale of 27% of its total stake in Alibaba Group Holding Ltd (NYSE:BABA). CNBC‘s Josh Lipton revelaed Yahoo! Inc. (NASDAQ:YHOO)’s plan for half of this investment. It’s going out to the shareholders, but exactly how is still unclear. Is it going to be in the form of dividends or a share buy-back program?

Yahoo! Inc. (NASDAQ:YHOO)

In fact the vagueness surrounding this issue is as old as Alibaba Group Holding Ltd (NYSE:BABA) announced its intention to go public, which is as early as March this year. Yahoo! Inc. (NASDAQ:YHOO) has not been very forthcoming about its plans ever since. This opaqueness of the company can also be seen in Yahoo! Inc. (NASDAQ:YHOO)’s CEO, Marissa Mayer’s statement earlier this year.

“[…] I can point to what we have done historically and i can also point to the fact that we know that this is of critical importance to our investors , how any proceeds are handled and the fact that we will continue to be good stewards of the capital […],” said Mayer.

Yahoo! Inc. (NASDAQ:YHOO)’s stock price has skyrocketed in the last twelve months, a gain of about 40%. From just four weeks ago the stock is up about 12%. All of this has been possible because of Alibaba Group Holding Ltd (NYSE:BABA)’s IPO, as investor’s who wanted to play Alibaba bought Yahoo! Inc. (NASDAQ:YHOO) and the demand for the stock rose which in turn drove the price even higher.

The saying goes, do not count your chickens before they are hatched. Is Yahoo doing just that by waiting to see how Alibaba Group Holding Ltd (NYSE:BABA)’s IPO progresses before it can make any investment decisions? Hopefully not, because this is certainly not one of the egg hatching situations. If the company delays or makes a poor investment decision, this  could have disastrous effects on the company’s stock price as all new shareholders will flee.

Disclosure: none

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