/// Here’s Dan Loeb’s Letter to Investors About the Value of Yahoo’s Alibaba Stake
I got ahold of parts of the fourth quarter 2011 investor letter that the New York-based Third Point hedge fund — which is prepping proxy fight with Yahoo — is sending out tomorrow. (The Wall Street Journal did a short post after it had reviewed excerpts of the letter, but had no text, so here is the real thing about Yahoo in its entirety, folks!) The letter includes a long section about how Third Point’s main man Dan Loeb feels about Yahoo and especially in the value of its investment in China’s Alibaba Group. The stakes that the Silicon Valley Internet giant hold in Asia — including in Yahoo! Japan — make up for a great deal of its valuation now, as many know and as the activist shareholder points out in detail. Here’s the Yahoo-Alibaba part, titled “The Case for Alibaba,” in what is a very sharp analysis — except for the part about dinging the press (not nice , Danno!): Long Equity: Yahoo! — The Case for Alibaba As investors are aware, we established a sizeable position in Yahoo following a difficult operational and strategic stretch during the waning days of CEO Carol Bartz’s tenure that culminated in a significant sell-off in the shares in August. Initially, we were attracted to the company simply by its significant discount to intrinsic value. In September, we announced publicly that we had accumulated 5.2% of the shares of the company and laid out our case for why valuation was depressed. While the travails of “core Yahoo” grab all the headlines, core Yahoo forms only a modest portion of the Company’s actual value (a mere $2.00 per share, trading at ~14.49 as of 03/12/12). The after-tax value of Yahoo’s Asian assets — Alibaba and Yahoo! Japan — currently constitutes $11 per share of its value (73%), with an additional $2 per share of net cash. Central to our investment thesis is the hidden jewel in the Asian asset portfolio, and indeed in Yahoo itself: Yahoo’s 40% stake in Alibaba Group, the dominant e-commerce platform in China.
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Here’s Dan Loeb’s Letter to Investors About the Value of Yahoo’s Alibaba Stake
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