Altaba (AABA +0.00%), the investment-management fund formerly known as internet services veteran Yahoo!, just reported its results for the fourth quarter of 2018.
After unloading Yahoo's actual operations to Verizon in a $4.8 billion deal three years ago, Altaba is now a highly focused investment manager whose core holdings consist of shares in Chinese e-commerce giant Alibaba (BABA +0.79%). As such, Altaba's quarterly results are closely tied to Alibaba's and the two stocks tend to move in tandem.
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By the numbers
| Investment | Fair Value as of December 31, 2018 |
Fair Value as of December 31, 2017 | Change |
|---|---|---|---|
|
Alibaba |
$38.8 billion |
$66.1 billion |
(41%) |
|
Other Investments |
$7.7 billion |
$15 billion |
(49%) |
|
Total Altaba Investments |
$46.8 billion |
$81.1 billion |
(42%) |
Data source: Altaba's SEC filings.
What the numbers mean
The dramatic year-over-year shifts in Altaba's asset portfolio springs from a concerted effort to unwind the investments and return the cash to shareholders as efficiently as possible. This started with a $2 billion sale of shares in Yahoo Japan in the second quarter of 2018, followed by exiting that entire position in the third quarter. At the start of the second quarter, Altaba held $9.4 billion of Yahoo Japan's stock. Six months later, the entire position had been liquidated.
The third quarter also saw Altaba reducing its Alibaba stake for the first time. A $70 billion position shrank to $45 billion in two short quarters but was then left untouched during the fourth quarter. The Alibaba asset's value fell 13% over that three-month period due to the company's struggles amid international trade wars. All told, Alibaba shares worked out to 82% of Altaba's total asset value at the end of December. That's up from 72% three months earlier and 78% at the end of 2017.
That trend has turned in early 2019. Alibaba crushed Wall Street's expectations in its fourth-quarter report and the stock has gained 33.5% in two months. Naturally, Altaba followed suit with a gain of 28.7%.
The fund's prime objective remains boosting its direct value to shareholders relative to the market value of its Alibaba holdings. Doing so involves advanced tax planning that accounts for the tax liabilities involved in bringing home cash profits from abroad.
Altaba is organized as a Delaware corporation but only 11% of the Alibaba holdings are directly controlled by the firm itself. The rest, roughly 89%, is held under a Hong Kong subsidiary, exposing Altaba's accounting to border-crossing complications. The recent stock sales have mainly involved U.S.-based holdings so far because the Hong Kong firm owned 86% of Altaba's Alibaba shares a year ago.
