Hey Ma, What's Up?

Last week, it was written that Alibaba CEO Jack Ma could potentially be interested in taking over Yahoo YHOO. Over the weekend, Ma confirmed those interests, saying he would be very interested in taking over Yahoo as a whole. As such, shares are higher today, gaining more than 5%, one of the best performers in the S&P 500. Ma spoke at Stanford University over the weekend, and said, "We are very interested in Yahoo because our Alibaba Group is so important to Yahoo, and Yahoo is also very important to us. There are so many people who are interested in that, and we are also talking to them." The quotes were captured by Bloomberg. Ma seemed "very interested" in buying Yahoo, as the two companies have a long history together. Since Yahoo announced it was firing former CEO Carol Bartz, it was speculated that the company was up for sale. The company confirmed that in a letter to the employees, and outside investors, but stressed that the process would take a while. The train at the Sunnyvale, Calif.-based company is being lead without an engineer at the helm. (In fact, Third Point's Dan Loeb called the board of directors "clowns"). It is very clear from Ma's comments that negotiations are going on at very high levels, and the potential "deal train" is signaling "all-aboard." The comments by Ma over the weekend have been speculated about for some time now, especially when Loeb talked about it at the Delivering Alpha conference just a few weeks ago. Loeb was very bullish on Alibaba, the Chinese Internet giant led by Ma, and he hinted that Ma could be part of the transaction to take Yahoo private. Yahoo currently owns 39% of Alibaba and according to Eric Jackson, of Ironfire Capital, when Alibaba goes public, it could be worth anywhere between $40 and $60 billion. It would make sense that since Yahoo owns such a valuable Asian commodity, and Ma and Yahoo co-founder Jerry Yang are close friends, that something is in the works. There still is the issue of "political issues," as Ma described over a potential Alibaba-Yahoo transaction, but something seems likely to get done eventually, barring any major snafus. When Loeb announced that he and his hedge fund, Third Point LLC, had amassed a 5.1% stake in the company, Loeb made it clear that he saw tremendous upside in the name, thanks in large part to the Asian assets. He said that under current leadership, that Yahoo was not able to recognize the value of its assets, including Yahoo! Japan, and Alibaba. The situation got so bad at Yahoo that Ma actually tried to steal AliPay, Alibaba's version of PayPal, away from Yahoo, but there was ultimately an agreement made. With Loeb being an activist investor who understands technology, and the potential for an Alibaba-transaction in the near future, it does appear that a transaction will occur. Carl Icahn and David Einhorn have come and gone on Yahoo, with both being unsuccessful, but it looks like now Loeb, with the support of Ma, and potentially other partners, will get something done. The potential answer to the title of the article: Do you, Jack, Yahoo? ACTION ITEMS:

Bullish:
Traders who believe that Jack Ma is sincere in his willingness to buy Yahoo might want to consider the following trades:

• Loeb thinks that Yahoo is worth anywhere between $19 and $31 per share. Investors may want to consider the common stock, or long dated calls in this name.

Bearish:
Traders who believe that Yahoo will not get sold may consider alternate positions:

• Yahoo's board, led by Chairman Roy Bostock, messed up the Microsoft MSFT deal back in 2008. The board is still the same. Unless the board of directors is really serious this time about getting the maximum shareholder value for Yahoo, then it could very well be the same fate.
  
  

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