Yahoo Inc. assets consist of cash, a stake in Yahoo Japan, a 15% stake in Alibab
ID: 463018 • Letter: Y
Question
Yahoo Inc. assets consist of cash, a stake in Yahoo Japan, a 15% stake in Alibaba - China's mega e-commerce firm, and operating assets of its core internet business. Analysts are estimating that the combined value of cash + Yahoo Japan stake + Alibaba stake now exceeds the total value of Yahoo Inc. implying thet Yahoo's operating profit assets/core business has a negative value.
1. What are the possible rational market and inefficient market explanations for a negative valuation of Yahoo's operating assets?
Explanation / Answer
Alibaba and Yahoo Japan had a joint venture together and shared the profts jointly. Lately it was observed that the Yahoo operating assets were at negative value which resulted into rethinking of the contract. Possible rational market are those which has less intevention and where the decisions are made as per the market demand. Their was a sudden fall in the share price of the yahoo price which devalued their assets and this led to negative growth. The operating assets market declined due to which their was a discomfort against the yahoo strategy and market dominance. Yahoo also had the inefficient market that is the market was not capable to handle the losses and ultimately resulted into discomfort for the customers.
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