Yahoo Inc. investors may be a little more forgiving about the company’s delay in spinning off its large stake in Alibaba Group Holding Ltd., as the China-based e-commerce giant’s upbeat revenue outlook helped send Yahoo’s stock to a 17-year high and boosted its coffers by over $6 billion.
Alibaba Chief Financial Officer Maggie Wu said earlier Thursday that fiscal 2018 revenue is expected to rise 45% to 49% above year-ago levels, drawing cheers from the crowd attending the company’s
Investor Day at its headquarters in Hangzhou, China. That was well above consensus expectations of 36% growth as of May 31, according to a FactSet survey of Wall Street analysts, and compares with 2017 growth of 47%.
The comments sent Alibaba’s American Depositary Receipts (ADRs) soaring $16.70, or 13.3%, toward a record close of $142.34, adding about $43.1 billion to the company’s market capitalization. That marked the biggest one-day price and percentage gains since the ADRs made their debut on the New York Stock Exchange on Sept. 19, 2014.
Meanwhile, Yahoo’s stock jumped $5.16, or 10.2%, to $55.71, the highest close since Sept. 22, 2000.
agreed nearly a year ago to sell its web assets to Verizon Communications Inc.
a deal that is expected to close next week, but has left investors hanging for years as it tries to figure out a way to best monetize its Alibaba holdings. As of March 31, Yahoo still owned 384 million ordinary shares of Alibaba, according to recent filings, which based on Alibaba ADR prices valued that stake at $41.41 billion at that time.
See also from January 2015: Yahoo announces plan to spin off alibaba stake
Given that 1 ADR represents 1 ordinary share, Thursday’s rally in Alibaba’s ADRs would boost the value of Yahoo’s stake by $6.41 billion. And since Dec. 8, 2015, when Yahoo said it was shelving its plan to spin off the stake, the value of that stake has ballooned by $22.26 billion, which compares with Yahoo’s current market cap of $52.38 billion.
Alibaba’s ADRs are now worth more than double the initial public offering price of $68. They have rocketed 62.1% year to date, while shares of Yahoo have rallied 44.1% and those of U.S. e-commerce giant Amazon.com Inc.
have run up 34.7%. The S&P 500 index
has gained 8.7% so far this year.
Since Alibaba’s IPO, the correlation coefficient between Yahoo’s stock and Alibaba’s ADRs has been 0.896, in which 1.000 would be a perfect match.
Separately, Yahoo said Thursday that its shareholder have approved the deal with Verizon, and expects the deal to close on June 13, 2017. At that time, Yahoo will change its name to Altaba Inc. The Wall Street Journal reported that Verizon will cut 2,100 jobs at Yahoo and AOL after it completes the Yahoo deal.
Separately, Yahoo said Thursday it will extend its tender offer to buy up to $3 billion of its common stock to June 16 at 11:59 p.m. ET, from June 13 at 11:59 p.m.