Technology StocksAlibaba Group Holding Limited

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From: Glenn Petersen9/9/2017 10:24:10 PM
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Altaba (formerly Yahoo) owns a 15% stake in BABA. It is looking to unwind that position in 2018.

h/t Sr K

Altaba’s Endgame Could Reward Investors Nicely

The former Yahoo! trades at a 30% discount to the value of its assets, including a 15% stake in Alibaba. Management is aiming to close the gap.

By Andrew Bary Biography
Sept. 8, 2017 11:29 p.m. ET

Under CEO Jack Ma, Alibaba could buy Altaba in a tax-free exchange. Qilai Shen/Bloomberg

Alibaba Group Holding is having a stellar year. Shares of the Chinese e-commerce leader have risen 95% in 2017 to a recent $170, giving the company a market value of $437 billion. The stock added to its gains after management, headed by CEO Jack Ma, announced better-than-expected results in mid-August for the June quarter, including a 56% increase in revenue and a 65% jump in adjusted earnings per share.

A cheap way to play Alibaba (ticker: BABA) is through Altaba (AABA), the former Yahoo!, whose 15% stake in Alibaba is valued at $65 billion. That’s more than Altaba’s entire market value of $57 billion.

Altaba shares are up 65% this year, to about $64, on Alibaba’s big gains, but trade at a 30% discount to the value of the company’s assets (see table). These include the Alibaba stake; a 36% interest in Yahoo Japan, worth around $9 billion; net cash of $8 billion; and a patent portfolio worth about $700 million. There are some potential liabilities stemming from data breaches at Yahoo! a few years ago, but they aren’t expected to be significant. Barron’s has written positively about Altaba this year, including in a Follow-Up on July 1, when the shares traded around $54.

After Yahoo! sold its core business in June to Verizon Communications VZ -0.19480519480519481% Verizon Communications Inc. (VZ) for $4.5 billion, the company morphed into a New York–based investment concern and changed its name to Altaba. Its goal probably is to wind down its assets and realize as much value as possible for shareholders. The challenge is doing so in a way that preserves most of the value for holders.

The current discount to net asset value reflects several issues, chiefly investor concerns about potential taxes imposed and concessions that could be required in order to unwind the equity interests, mainly in Alibaba, which accounts for more than 75% of Altaba’s asset value. It is uncertain how long the process will take; many investors in Yahoo!/Altaba want to see the situation resolved by the end of 2018.

Altaba will probably not realize its full net asset value due to the cost of unwinding the equity stakes. But, bulls argue, the discount is too steep.

“Management at Altaba is singularly focused on creating shareholder value,” says Jeff Lignelli, a portfolio manager at Incline Global Management, a New York investment firm that holds Altaba shares. “We expect a large share buyback to help close the discount, and a tax-efficient sale of the Yahoo Japan stake, followed by the ultimate transaction: a share swap with Alibaba.”

He values Altaba at about $77, assuming a 20% discount on the Alibaba stake and a 10% discount on Yahoo Japan. Lignelli is bullish on Alibaba, calling it one of the fastest-growing megacap companies in the world. He thinks Alibaba shares could top $200.

Robert Willens, a New York tax expert, also thinks the discount to net asset value is too wide. “I’m convinced that Altaba will be able to dispose of or monetize its holdings on a tax-efficient basis,” he says. “The market is seriously undervaluing Altaba’s stock.”

Brett Harriss, an analyst at Gabelli, values Altaba at about $76, assuming a full tax bite on the sale of the Yahoo Japan interest and a 15% discount on Alibaba. He says SoftBank Group [9984.Japan] is a potential buyer of Altaba. Both SoftBank and Altaba own stakes in Yahoo Japan and Alibaba.

After the Verizon sale closed, Marissa Mayer departed as Yahoo’s chief executive officer. Altaba’s small executive team now is headed by CEO Thomas McInerney, a former chief financial officer at Barry Diller’s IAC/InteractiveCorp (IAC). There are just 15 employees.

In a June 19 letter to shareholders, McInerney pledged to reduce the discount to net asset value, which has remained around 30% since then. Management compensation is based in part on reducing that discount. The company maintains a live NAV calculation on its website. Last week, it was nearly 31%.

IN ITS FIRST ACT as an investment company, Altaba bought back $3.4 billion of stock at about $53 a share. It has since authorized a new, $5 billion share buyback. But it probably needs the cooperation of Alibaba to unload its 15% stake in the Chinese company, equal to nearly 384 million shares, without incurring a huge tax bill.

The scenario favored by investors, as outlined by Lignelli, would involve a return of Altaba’s current cash to holders via buybacks, followed by a tax-efficient sale of the Yahoo Japan stake to Yahoo Japan, possibly through a technique called a dividend strip, involving the payment by Yahoo Japan of cash and equity warrants. Willens favors this approach. If it happens, Altaba would be left with one dominant asset: its Alibaba shares.

It could sell its Alibaba stake in the open market, but unloading such an enormous block of stock could depress the price and generate a huge tax bill, because Yahoo! originally paid little for the shares more than 10 years ago. “We would be highly unlikely to ever sell Alibaba shares at a 36.5% combined federal and state tax rate because there’d be no incentive to do that,” McInerney said at an Oppenheimer investor conference last month.

The preferred scenario would involve Alibaba buying Altaba for stock in a tax-free exchange, essentially swapping its shares for the Alibaba stake held by Altaba. Since Alibaba is the only company that can make this happen, it has leverage. Alibaba might demand a concession as an incentive for the swap, such as getting a 15% or 20% discount on the shares. That means it could offer, say, to issue 310 million shares to Altaba holders in order buy Altaba and its 384 Alibaba million shares, effectively netting $12.5 billion (74 million shares times the recent Alibaba price of $170).

This financial incentive and the desire to keep Altaba’s large block in friendly hands might motivate Alibaba to act, although it probably couldn’t retire the stock without incurring a tax penalty. Willens says this issue is overblown and could be “just a negotiating ploy” by Alibaba to get a better price. However, it is unclear whether Alibaba wants to do a deal and whether it might seek a steeper discount, to accommodate Altaba. Alibaba declined to comment.

ALTABA’S MCINERNEY has said the company is watching to see if the tax-reform push in Washington will lower taxes. A cut to a 20% or 25% corporate rate from the current 35% would help reduce Altaba’s potential tax bite on an open-market sale of Alibaba stock.

A big risk with Altaba is a drop in Alibaba shares. To hedge the risk, some investors have sold Alibaba shares short to create a cheap “stub” of the remainder of Altaba. If the discount narrows, Altaba investors could score, even if Alibaba shares decline.

Another risk is that Alibaba won’t execute a transaction with Altaba. If that happens, Altaba’s options may be limited, possibly leading to a sale of the Alibaba stake in the open market—and a tax hit. In 2015, Yahoo! sought to spin off the Alibaba stake tax-free, but dropped the idea when it couldn’t get a blessing from the Internal Revenue Service.

Willens notes that Altaba could convert to a regulated investment company and pay out the Alibaba stock to shareholders in a tax-friendly way through a technique called distributions in redemption. But that approach is complicated and could face challenges from the Treasury or IRS.

It is tough to handicap the Altaba situation, given the uncertainty about Alibaba’s intentions. But the Chinese e-commerce company just might want to negotiate a share swap that benefits itself and Altaba, finally concluding the Yahoo!/Altaba saga.


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To: Glenn Petersen who wrote (516)9/10/2017 8:57:07 AM
From: John Carragher
   of 606
i looked at Altaba yesterday after reading the article. i came away i would rather hold directly the stocks in their group than it.

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From: Julius Wong9/13/2017 12:49:19 PM
   of 606

How an Alibaba Spinoff Created the World’s Largest Money-Market Fund

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From: JakeStraw9/22/2017 12:44:41 PM
   of 606
Alibaba Group Holding Limited is now covered by analysts at Cantor Fitzgerald. They set an "overweight" rating on the stock.

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From: Sr K9/26/2017 7:14:32 AM
   of 606

Monday pre-market, and on page 1 Tuesday:

World’s Largest Money-Market Fund Will Lower Its Returns, Shed Risk

Alibaba spinoff Yu’e Bao is making changes to comply with new Chinese investment rule

Sept. 25, 2017 5:30 a.m. ET

BEIJING—The manager of the world’s largest money-market fund said it would take steps to reduce risk in its investments and lower the lofty yields that have helped draw a flood of cash into the fund over the past year.

Tianhong Asset Management Co., a Beijing-based company that manages a money-market fund with more than $200 billion in assets, is making changes to comply with liquidity rules imposed recently by Chinese regulators,...

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From: Glenn Petersen9/27/2017 9:44:29 PM
   of 606
Alibaba said it plans to invest over $15 billion in the next five years to develop its global logistics network.

Alibaba pays $807M to take majority ownership in logistics affiliate Cainiao

by Jon Russell ( @jonrussell)
September 26, 2017

Alibaba is getting serious about logistics after it agreed to invest RMB 5.3 billion ($807 million) in order to take majority ownership in subsidiary company Cainiao.

Cainiao was created four years ago alongside eight other backers to bring organization in Chinese logistics, particularly around e-commerce deliveries. The company raised its first outside funding in March 2016 — reportedly RMB 10 billion ($1.54 billion) at a RMB 50 billion ($7.7 billion) valuation — from backers including Temasek Holdings and GIC in Singapore, Malaysia’s Khazanah Nasional and China-based Primavera Capital.

It is currently not profitable, but investors see its close relationship with Alibaba as the ticket to developing a lucrative business. Alibaba said the goal is to enable e-commerce services in China to fulfill customer orders within 24 hours, and those overseas within 72 hours, and Cainiao is a core part of that. Indeed, Alibaba said it plans to invest over $15 billion in the next five years to develop its global logistics network.

Cainiao itself just set up a billion-dollar fund with insurance firm China Life to speed up China’s parcel networks with a range of new handling and sorting offices.

Today’s investment is likely to go through next month and it will take Alibaba’s ownership from 47 percent to 51 percent, which in theory gives Cainiao a valuation of RMB 132.5 billion ($19.9 billion). But that’s theoretical because Alibaba’s motivation is likely to have been influenced by other matters.

The SEC last year launched a probe into Alibaba’s accounting systems, and whether it has violated federal securities laws. The firm’s accounting of Cainiao was one component to that, since it only listed some financial information as a minority equity holder. Now, as a majority stakeholder following this deal, it is likely that Alibaba’s transparency over the company will increase going forward. Beyond more information for regulators, it may also appease shareholders curious to learn more about a company Alibaba is helping to bankroll.

Alibaba’s other affiliate companies include Koubei, which got a $1.1 billion injection earlier this year, and Ant Financial, which is valued at over $60 billion and tipped to go public soon.

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From: JakeStraw10/3/2017 11:44:23 AM
1 Recommendation   of 606
Alibaba Group Holding Limited is now covered by analysts at Credit Suisse Group. They set an "outperform" rating and a $220.00 price target on the stock.

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From: Glenn Petersen10/11/2017 5:35:48 AM
   of 606
Alibaba says it will invest more than $15 billion over three years in global research program
  • Alibaba announced it will invest more than $15 billion over the next three years in a global research and development program
  • As part of the program, Alibaba will set up research labs in China, the United States, Russia, Israel and Singapore
  • The labs will conduct research in areas such as data intelligence, Internet of Things, financial technology, quantum computing and human-machine interaction
Saheli Roy Choudhury | @sahelirc
October 11, 2107

Wang He | Getty Images
Jack Ma, founder of the Alibaba Group attends the 2017 forum on rural headmasters on July 12, 2017 in Hangzhou, Zhejiang province of China.

Chinese e-commerce giant Alibaba[ announced Wednesday it will invest more than $15 billion over the next three years into a global research and development program to increase collaboration and develop new technologies.

That sum was slightly more than double the total amount Alibaba spent on R&D between 2014 and the fiscal year that ended March 31, 2017.

The program is called the Academy for Discovery, Adventure, Momentum and Outlook — DAMO Academy for short. As part of the program, Alibaba will set up seven research labs in Beijing, Hangzhou, San Mateo and Bellevue in the U.S., Moscow, Tel Aviv and Singapore, and recruit 100 researchers to staff them.

Those labs will undertake projects in areas of data intelligence, Internet of Things, financial technologies, quantum computing and human-machine interaction, including machine learning and Natural Language Processing. They would collaborate with institutions such as the University of California, Berkeley through its RISE Lab.

The program, Alibaba said, will be guided by an advisory board comprising researchers and educators from several top universities, including MIT.

The announcement was made by Alibaba Chief Technology Officer Jeff Zhang at the company's Computing Conference 2017 in Hangzhou, China.

Zhang, who will lead the academy, said in a prepared statement that the research program will be "at the forefront of developing next-generation technology that will spur the growth of Alibaba and our partners."

"We are now looking for talented and driven researchers to join us in the quest for new disruptive technologies that would advance our every-day lives, benefit small businesses and narrow the technology gap to make our world a more inclusive place," Zhang added.

Alibaba said the program will help the tech giant fulfill its long-term commitment to serve 2 billion customers and create 100 million jobs in 20 years.

Experts have previously said that China was moving more into the research and development of hardcore, cutting-edge technologies. In September, investment bank Goldman Sachs issued a report saying the world's second-largest economy has emerged as a major contender in using artificial intelligence to drive progress.

Other major Chinese tech companies, such as Baidu and Tencent, have in recent years opened research and development labs around the world to develop new technologies.

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From: Sr K10/11/2017 9:16:35 PM
   of 606
On WSJ an hour ago:

The Chinese government is pushing some of its biggest tech companies—including Tencent, Weibo and a unit of Alibaba—to give the state a stake in them and a direct role in corporate decisions.


here's the story

Beijing Pushes for a Direct Hand in China’s Big Tech Firms

Government regulators have discussed stakes in Tencent, Weibo and an Alibaba subsidiary

By Li Yuan

Updated Oct. 11, 2017 7:27 p.m. ET

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From: Glenn Petersen11/2/2017 11:10:16 PM
   of 606
Alibaba’s Earnings Jump as China’s Online Shopping Boom Continues

New York Times
NOV. 2, 2017

Alibaba’s headquarters in Hangzhou, China. It has become one of the most highly valued technology companies in the world. Credit Wang He/Getty Images

HONG KONG — When Joseph C. Tsai, the billionaire vice chairman of the Alibaba Group, recently agreed to buy a 49 percent stake in the Brooklyn Nets, it was a sign of the enormous financial success that the company has enjoyed amid China’s e-commerce boom.

A visit to Alibaba’s largest shopping service, however, reveals one of the company’s biggest challenges. Available for purchase there is a wide variety of knockoff Nets merchandise, from jerseys to caps to T-shirts.

Alibaba has become one of the most highly valued technology companies in the world, and its recent string of strong financial results has signaled the continued rise of China’s internet industry and the heartiness of its hundreds of millions of online shoppers.

The company said on Thursday that profit for its most recent quarter more than doubled compared with the same period a year ago, thanks in part to a 61 percent rise in revenue. By comparison, Amazon reported a 34 percent revenue increase for the same quarter.

Still, the results released Thursday show that Alibaba still has ground to cover as it seeks to grow beyond e-commerce into more of a data and technology company. Apart from online shopping, its other businesses lost money.

Bigger and Bigger

Alibaba’s core business continues to be a money-spinner. That business generated nearly $3.6 billion in income during the quarter, about 50 percent more than a year ago. The company says nearly half a billion people now shop on its platforms annually.

Alibaba’s executive vice chairman, Joseph Tsai, recently agreed to buy 49 percent of the Brooklyn Nets — but knockoff Nets merchandise is still easy to find on the group’s shopping sites. Credit Mike Blake/Reuters

Despite worries about a debt binge that could choke economic growth, China’s new consumer class is expanding. That suggests the country’s online-shopping market, already the world’s largest, has room to grow yet. McKinsey estimates that the country’s middle class will expand to 315 million households by 2030, from 116 million households last year. In 2000, China had only two million middle-class households.

Future Bets

Alibaba has ranged far afield of e-commerce in recent years. It owns a movie studio, a soccer club and a Hong Kong newspaper, plus stakes in a variety of tech start-ups. The company is also spending $15 billion over the next several years on research in artificial intelligence and other cutting-edge fields.

In the near term, though, investors are more interested in Alibaba’s recently announced investment of the same amount in logistics. Alibaba has long depended on outside companies to deliver packages. But Jack Ma, the company’s founder and executive chairman, has said his goal is to ship anywhere in China within 24 hours, and anywhere in the world within 72. That will require a lot of spending.

Offline to Online

Alibaba has found ways to make more money from its shopping platforms. For instance, better targeting of ads at customers has helped generate more interest — and sales — from advertisers.

Still, the company also wants to capture more of the 85 percent of retail sales in China that take place offline. Alibaba has been buying stakes in grocers and other brick-and-mortar stores since well before Amazon’s acquisition of Whole Foods this year.

It has even opened its own grocery stores where purchases are made via smartphone app. These locations serve as hubs for delivering food to nearby homes, while also catering to shoppers who like to pick out fresh items, such as seafood, in person.

Alibaba says it is not interested in building a large grocery chain, however. The company says it wants to showcase the ways traditional retailers can incorporate online tools into their business — with the hope that those retailers will then do so using tools and services provided by Alibaba.

Going Global

Mr. Ma has circled the planet and hobnobbed with world leaders in his effort to take the Alibaba brand global. The company has paid billions of dollars to take control of Lazada, an e-commerce company in Southeast Asia. And Mr. Ma pledged this year that Alibaba would create a million jobs in the United States by linking small American businesses with Chinese shoppers, who tend to view American-made goods as higher quality.

But those efforts are not close to eclipsing Alibaba’s main businesses in China. In the latest quarter, Alibaba’s e-commerce business earned about 90 percent of its revenue at home.

A version of this article appears in print on November 3, 2017, on Page B5 of the New York edition with the headline: E-Commerce Fuels Alibaba Earnings Leap, but Challenges Loom.

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