What You Need to Know About Altaba Inc. and Its Investments

When Yahoo! sold its operating business to Verizon Communications (VZ -4.67%) for $4.48 billion, that was not the end of Yahoo as a publicly traded investment. What remains of the former Yahoo! company is now known as Altaba (AABA), and operates as a closed-end management investment company with large holdings in a few handpicked companies. The company boasts a $56 billion market cap, dwarfing the Verizon deal's financial impact.

Altaba just shared its first financial update since the Verizon transaction, and also re-upped its share buyback program with a fresh $5 billion commitment. I'm here to give you a quick update on Altaba's affairs.

Altaba's 3 largest holdings, by the numbers

Let's start with an overview of Altaba's three largest holdings. That would be Alibaba (BABA 2.33%), Yahoo! Japan, and Snap (SNAP -0.18%).

Data source: Altaba.

The company then known as Yahoo! also held cash equivalents and marketable debt papers valued at $7.2 billion at the end of 2017. The debt securities alone are now valued at $12.7 billion. The Excalibur operation, which contains a basket of technology patents not related to the core Yahoo! operation and not therefore passed on to Verizon, is now worth an estimated $665 million.

All told, investments in businesses affiliated with the old Yahoo! business now add up to $60.6 billion while unaffiliated investments in bank bonds, government debt, and other unrelated affairs work out to a fair value of $12.9 billion.

Image source: Alibaba.

What's up with the big value changes?

Altaba's investments were largely set up in the Yahoo! days, often long before the target companies joined the public market. The Alibaba and Yahoo! Japan positions remain unaltered, down to the last share. The fair value changes come from Yahoo! Japan and Alibaba racking up big gains on their own, plus a smattering of currency exchange effects.

Between Altaba's two financial reporting dates, the U.S. dollar strengthened by roughly 5% against the Japanese yen and by 2% versus the Chinese renminbi. Meanwhile, both Alibaba and Yahoo! Japan delivered strong share price gains. Alibaba's American depositary shares gained 52% over this period, while the Japanese internet services operation posted a 16% gain.

Do keep in mind that these gains already include the currency-based effects. These are still impressive gains.

In particular, Alibaba held a successful investor day in June, outlining a bright future of world-class e-commerce operations and a serious commitment to growth outside the Chinese market. This is not a bad time to be a proxy for owning Alibaba, a title Altaba can claim since 70% of its total holdings are directly invested in that stock.

What else is going on?

In other news, Altaba announced that it had repurchased roughly 6.7% of its own shares in a $3.4 billion tender offer in June and July. To replace that program, which was started under Yahoo! in 2015, the buyback policy was given a fresh $5 billion commitment.

"We have consistently stated that it is our intent to return substantially all of our cash to shareholders over time (of course, retaining what we need to cover liabilities and operate the Fund) -- and with this action, we state it again today, clearly," said Altaba CEO Tom McInerney in a prepared statement.

The financial data presented earlier did not come from a regular quarterly earnings report, but was simply a first-day accounting of Altaba's assets and liabilities. Altaba has yet to determine when its fiscal year starts and ends, which makes it difficult to estimate when the first earnings report under the new name might turn up. It would make sense to align the fiscal year with this date of inception, meaning June 16, though quarters ending in the middle of a calendar month are pretty rare.

So we'll see. At least we know what cards the company is holding now and where it intends to invest any incoming cash flows.