If you are new to Altaba Inc. (NASDAQ:AABA), don't be put off; everyone is new to Altaba. The company is what was left over after Yahoo! sold its core business to Verizon Communications (NYSE:VZ). Altaba is the new name for what is now classified as a financial holding company. Here's a look at assets and liabilities inside Altaba.
First, a review
Yahoo!'s core business is all the applications and websites that made it one of the most well-known early pioneers of the internet. That all became part of Verizon along with most of its 8,600 employees on June 13 for the princely sum of $4.48 billion in cash. That money is being paid to Altaba.
In addition to getting Yahoo!'s core business, Verizon also received the Yahoo! brand name. If you owned Yahoo! stock, you will notice a change in your brokerage statement. The shares are now called Altaba and the ticker symbol is AABA. This has all been happening behind the scenes; there is nothing individual shareholders need to do.
Altaba is primarily comprised of the non-core foreign assets that were formerly part of Yahoo!, an IP patent portfolio that is called Excalibur, and the cash it received for selling YAHOO!'s core business to Verizon plus cash, cash equivalents, and marketable securities it already had on its books. It also has some debt on its books in the form of convertible notes.
What is Altaba's mission?
Altaba was created to maximize shareholder profits and efficiently return cash to shareholders. To do so, the company will try to figure out a tax-efficient strategy to sell its assets and return its cash to stockholders. This is easier said than done due to complex federal and state tax regulations that would take as much as 36.5% of its profits from the sale of foreign assets if they were sold and the cash repatriated back to the United States.
Altaba's foreign assets
Altaba owns shares of two foreign businesses. It owns approximately 36% of Yahoo Japan and approximately 15% of Alibaba Group Holding Limited (NYSE:BABA). This table shows the number of shares that Altaba owns and the value of those holdings.
|Company||Shares Owned by Altaba||Value of Shares as of June 16, 2017|
|Alibaba Group Holdings Limited||383,565,416||$59.4 billion|
|Yahoo Japan||2,025,923,000||$9.2 billion|
The company has a cost basis, or what it paid for both investments, of $5.9 billion. This is a great demonstration of how much money can be made when shares are held long term, as profits on the holdings are over $54 billion. These two holdings comprise the bulk of the value of Altaba.
Altaba has stated it had a tax liability of almost $15 billion in its latest proxy statement based on the closing prices for the two stocks as of the end of 2016. Today, that number is even higher based on share prices gains.
Altaba's other assets
Altaba also owns minority interests in a variety of other companies, including Hortonworks and SNAP. These minority stock holdings are relatively small -- about $130 million in value -- in comparison to its holdings in Alibaba and Yahoo Japan, which combined are worth more than $60 billion.
The patent portfolio, Excalibur, is listed on Alibaba's books as being worth $740 million.
All the company's cash, cash equivalents, and marketable securities are worth approximately $12 billion.
The final tally
Add up all of Altaba's holdings, and the company is worth roughly $85 per share on a pre-tax basis. The shares trade for over a 30% discount to the pre-tax price, as the market needs to price in the tax burden facing the business. But, investors are hoping management can figure out how to minimize taxes, which would give shares a lift.
As share prices change daily, the company has created an almost real-time display of its pre-tax share price and its actual share price that is available at its website.
For now, investors will continue to hope that management can find the most tax-efficient method to get cash out of the company and into shareholders' pockets.