Yahoo Loses $12 Billion on Alibaba Stake
Yahoo Inc. (YHOO, -4.27%) must be counting the seconds until the spinoff of its stake in Alibaba Group Holding Ltd (BABA, -5.12%). Since the company announced their intentions 7 months ago to spinoff, Yahoo’s market value has declined by $12 billion. That is, at the close of trading on the 27th of January, the value of this stake was at $39.53 billion at a closing price of $102.94. Seven months later, these same shares are now trading at $72.24 each, at a value of $27.74 billion. Yahoo still currently owns 384 million Alibaba shares and since Tuesday, the value of these shares has declined by $1.96 billion. This decline came after the Chinese e-commerce giant reported poor fiscal first quarter results which saw their stock price drop 6.6% during morning trade. According to FactSet, in one day, the market valuation of Yahoo has declined by $1.82 billion and by $13.01 billion since the spinoff announcement. It seems to be clearly evident, that the future of Yahoo’s stock seems to be closely linked to the value of its Alibaba stake. Since the 27th of January, the stock of Alibaba has declined by 30 percent. This has now pushed the e-commerce giant close to its lowest level in the last 11 months. In addition, over the same period, the shares of Yahoo have also declined by 29 percent while in comparison, the S&P 500 index (SPX) has gained by 1.2%. On Wednesday, the shares of Yahoo took another beating, dropping another 5.4%, pushing the stock price closer to its lowest close which it reached in the middle of last year. While the intentions were for the spinoff to occur in the 4th quarter, last month, Yahoo warned its investors that their proposal for a tax-free spinoff might still be rejected by tax regulators in China and the U.S. Yahoo is currently trading at $34.49 a share.
In U.S. trading on Wednesday, stocks traded higher. Interestingly, the S&P 500 index (SPX) briefly declined into negative territory for the year during the trading session, down by 32 points, and this came in response to the 2nd day of weakness for the Chinese yuan. A major selloff was evident in financial and telecommunications stocks as a result of investor concerns regarding China. By the close of trading though, the SPX closed up 0.1%, or 1.98 points, at 2,086.05. According to Dow Jones data, while the index was down in morning trade, this swing to the upside marked the biggest positive reversal for the index since the 4th of October 2011. On the downside was the Dow Jones Industrial Average (DJIA) which closed virtually flat, down 0.33 points at 17,402.51. This came after the blue chip index was down by more than 277 points during the trading session. Meanwhile, the tech heavy Nasdaq Composite Index (COMP) rose 0.2%, or 7.60 points, to 5,044.39. During the trading session, this index declined by more than 91 points.
On Wednesday, the U.S. dollar declined more than 1 percent to one-month lows. This came as investors were still digesting news that China had devalued its currency for the second consecutive day. At the close of trading on Tuesday, the yuan dropped to a 4-year low against the greenback. This came after the People's Bank of China set the yuan's midpoint rate weaker thereby devaluing its currency by 2 percent. Meanwhile, the EUR/USD traded at 1.1150, up 1.30% while the USD/JPY traded at 123.97, down 0.92%. Against the currencies in Switzerland, Britain and Australia, the U.S. dollar traded lower with the USD/CHF down 1.75% to 0.9708, the GBP/USD up 0.34% at 1.5625 and with the AUD/USD up 0.72% and trading at 0.7356. Also, the U.S. dollar index was at 96.18, down 1.10%, which marked the lowest level since the 13th of July.
Crude oil prices moved higher on Thursday in early morning Asian trade. This came as investors focused on the global supply glut while looking for attempts to stimulate demand through aggressive pricing or a trimming of the current output. WTI crude oil for delivery in September traded at $43.22 a barrel, up 0.34%, or $0.15, on the NYMEX. Meanwhile, Brent crude oil for delivery in September traded at $49.53 a barrel, up 0.91%, or $0.45, on the Intercontinental Exchange (ICE) in London. The spread between the U.S. and international benchmarks of crude oil stood at $6.93. This was above the level on Tuesday at $6.57.