Yahoo has been throwing money around a lot over the past 18 months, purchasing many different companies to help push their brand back into relevance. If some people were worried about the tech giant running low on liquid cash, they can set their fears aside. In 2005, Yahoo purchased 40% of Chinese e-commerce company Alibaba, which was worth $2.5 billion at the time. Several years ago, they sold nearly half of their stake and made about $7 Billion before taxes. That left them with 23% ownership in the rapidly growing company.
Alibaba is going public, with what will very likely be the largest tech IPO in history. As part of this move, Yahoo is required to sell half of its remaining 23% holdings in the company that is estimated to be worth $200 billion today. This means Yahoo will likely bring in at least $12 Billion in cash overnight, assuming the IPO does as well as experts predict.
The big question that is on the minds of Yahoo investors, as well as many others in the tech industry is what they will do with this money. Most people expect the majority of the cash to be paid out to investors, as that is what was done with much of the $7 billion made from the previous sale. Knowing CEO Marissa Mayer, however, it also seems very likely that she’ll be able to hold back a significant portion to use on acquisitions to grow the company. Experts differ on how much they believe this will be, but it should be at least $2-3 billion, which will allow Yahoo to acquire some very attractive companies.
There are many different options on the table for Yahoo, and people throughout IT are speculating wildly about where this cash will end up. Most people believe Yahoo will continue to focus on growing their mobile business, but they will also be expected to try to build up ad revenue, which has been a weak spot for Yahoo over the past several years.
Companies like Foursquare, Pinterest, Snapchat and others have all been listed as potential acquisition targets. Of course, Yahoo is often difficult to predict. One thing is fairly certain, however, and that is the fact that Yahoo will be looking to make one or more big buys in the coming months.