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Bartz: Yahoo will be “appropriately compensated” for Alipay

Yahoo CEO Carol Bartz
Image used with permission by copyright holder

Backed up by Yahoo’s chief financial officer and co-founder Jerry Yang, Yahoo CEO Carol Bartz assured investors the company will be “appropriately compensated” for Alibaba spinning off online payments outfit Alipay into a separate entity controlled by Alibaba chairman Jack Ma, effectively taking one of the prize jewels away from Yahoo’s 43 percent stake in China’s Alibaba Group. Yahoo’s stock price has experienced a significant drop since the company revealed Alibaba had spun off Alipay earlier this month; although the companies say they’re committed to working out a solution, they have also traded unusual public barbs, with Yahoo claiming Alibaba spun off Alipay without a board vote or informing shareholders.

During a meeting designed to bring shareholders up to speed on Yahoo’s turnaround strategy, Bartz assured investors that all key shareholders in the deal are committed to ensuring Yahoo is appropriately compensated for the loss of Alipay from its investment portfolio. Yahoo co-founder Jerry Yang emphasized the spinning Alipay off into a separate entity with Chinese ownership was critical to Alipay receiving a Chinese government license to conduct online payments in China—and that strategy seems to have worked: the Chinese government has just granted that license, making Alipay one of the only entities authorized to conduct online commerce in China.

Bartz defended Yahoo’s disclosure of information about the Alipay ownership change as “timely and appropriate.” Yahoo says it learned about Alipay separating out on March 31; however, it did not disclose that information for nearly six weeks.

Yahoo’s 43 percent stake in the Alibaba Group—and its 35 percent stake in Yahoo Japan—are currently seen as some of the company’s primary financial assets as the company struggles to regain ground lost to the likes of Google, Microsoft, Facebook, Amazon, and Apple in the Internet services arena. Yahoo still commands a huge Internet audience—something like 600 million users—but the company has seen its stock price steadily decline over the last five years, in part due to a nearly-disastrous takeover sideswipe from Microsoft (which eventually say Microsoft taking over backend operations for Yahoo Search) and the company’s faltering ability to organize and leverage its substantial assets. As a results, the company’s holding in fast-growing Alibaba and Yahoo Japan are key to the company’s bottom line. Yahoo CFO Tim Morse indicated the company is looking at ways to enable investors to get money out of their Yahoo Japan holdings, including potentially spinning off a tracking stock, although no plans have been etched in stone.

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Geoff Duncan
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