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Posted on 9/24/14 at 4:35 pm to sneakytiger
I think the proper play here would be to buy Yahoo stock and some cheap put options for Alibaba as a hedge against the chance that its stock collapses.
The most rational market hypothesis here would seem to be that the market believes that Yahoo will take all the free cash flow it will get from Alibaba and use it to invest in shitty projects that will result in negative core earnings. Of course that assumes that management will be able to fend off acquisition attempts, but this still looks like a perfect candidate for a merger arbitrage investment.
Good stuff.
The most rational market hypothesis here would seem to be that the market believes that Yahoo will take all the free cash flow it will get from Alibaba and use it to invest in shitty projects that will result in negative core earnings. Of course that assumes that management will be able to fend off acquisition attempts, but this still looks like a perfect candidate for a merger arbitrage investment.
Good stuff.
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