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.

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Posted by Ole War Skule

North Shore

Member since Sep 2003

3409 posts

Posted on 9/24/14 at 5:10 pm to Doc Fenton

quote:
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

exactly, the market has absolutely ZERO confidence in management...they're actually making money and alexa says 4th top web site in the world!

talk about no respect

they obviously know something I don't though as I'm under water badly on some oct 18 42 calls....

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Posted by tirebiter

7K R&G chile land aka SF

Member since Oct 2006

9304 posts

Posted on 9/25/14 at 11:17 am to Doc Fenton

quote:
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.

Those of us that recall this massively shitey deal will never trust Yahoo no matter who is running the company:
Yahoo to buy worthless Broadcast dot com and make Cuban ultra wealthy

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