Yahoo! Inc was in a fix when its shareholders claimed that the U.S. Web Portal had misled them about the restructured business of Alibaba Group Holding Ltd., which is based in China. The complaint which was filed yesterday, by the investors in San Francisco’s federal court. They claimed that Yahoo had not informed them before 10th May, that the investment in Alibaba which was worth $1 billion was “severely impaired.” This was because there was a transfer of Alipay, a payment business to another company which is being closely held by Jack Ma, Chairman of Alibaba who controls this new company.
The management of Yahoo got the details about the restructuring before 31st March, which had resulted in diminishing the value of the investment made by Yahoo in Alibaba. The monetary count would be reduced by billions of dollars, which the complaint mentioned. The suit further details that the Chinese regulations had expected the restructuring to happen, because of which it had asked Yahoo to divest their investment from Alipay. But the U.S. Web Portal could not come up with a strategy to recover its investment which was made in Alibaba.
Based in Eastern China’s Hangzhou, Alibaba noted that on 29th July, Softbank Corp. and Yahoo, two of its biggest shareholders had come to an agreement for a deal for compensation which can result in $6 billion receipt approximately from Alipay to Alibaba. This agreement finally closed the dispute which as on for four months and was between the foreign shareholders and Alibaba, China’s biggest e-commerce company. Softbank Corp. is Japan’s third-biggest mobile carrier.
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| Jack Ma |
Yahoo previously said that till last year the BOD approval was lacking in this sale from Alibaba to Jack’s company. For the disclosure, it said that Alibaba investors were informed about the sale only in March. However there was no immediate comment from Dana Lengkeek who is a Yahoo spokeswoman.
Talking about the lawsuit, it was filed on Minnesota-based Twin City Pipe Trades Service Association’s behalf. This association is located in Saint Paul, Minnesota.
Yahoo has from the past few years been bringing out bad news for its shareholders and investors. Of late it was compiled that Yahoo’s worth has depreciated to $ 14 billion now from $47.5 billion three years back, when Microsoft had offered to take over Yahoo. Yahoo might have known its potential then and maybe that was the reason for its decline to the offer, but the potential was maybe competed by Google and Facebook.
This sounds worse as Yahoo’s overall worth as compared to the investment it holds in Alibaba would be just 44 % more than the former. This was detailed by Thornburg Investment Management. However traders are optimistic in Yahoo’s case and are betting that the U.S. Web Portal’s value will increase.
Yahoo of late has been coming up with reliable services like Yahoo! Sports Radio and Yahoo! Web Player, and this news would turn mixed reactions from everyone related to Yahoo. There needs to be an update from Yahoo management and there would surely be one in response to the lawsuit filed.