Yahoo, like Facebook and Google, makes money off online advertising.
But unlike those companies and others, Yahoo's online advertising business has been stagnant for years. That's led many of Yahoo's investors to remain in the company not for the sake of its business, but for the sake of its stake in Chinese e-commerce giant Alibaba.
Yahoo still has a roughly 15% stake in Alibaba, which is worth around $34.4 billion. The company also has a stake in Yahoo Japan worth $8.2 billion, according to data compiled by Bloomberg. In addition, Yahoo sold 140 million shares (including additional shares as part of the IPO's "greenshoe") in Alibaba's IPO at $68, netting the company about $9.5 billion.
As the Wall Street Journal points out, if these were all taxed based on the 38% capital gains rate, the contribution of its Asian assets and the Alibaba windfall to Yahoo's worth would be around $33.1 billion. Yahoo also had around $1.1 billion in cash and cash equivalents at the end of June, according to its most recent earnings release. That would leave Yahoo's core advertising business worth around $6.3 billion — far less than its current market capitalization of $40.5 billion.
This makes Yahoo not a very big online advertising business at all, compared to giants like Facebook and Google. That's partially why some activist investors are now suggesting that Yahoo buy AOL, another company that makes money off online advertising, to beef up its business. Shares of Yahoo are actually up about 5% in trading today.
So, with that in mind, can you guess if the $6.5 billion value of Yahoo's core business is worth more or less than:
