Once the dust from Alibaba’s mammoth IPO is settled, Yahoo is going to have a lot more cash to play with. The US internet company was expected to sell nearly 140 million shares into the eagerly anticipated offering last night, raising $9 billion, for after-tax proceeds of at least $6 billion.
The company has already pledged to return half of the IPO proceeds to shareholders (presumably through dividends and buybacks.) That will leave CEO Marissa Mayer with $3 billion-plus to play with (in addition to the $4 billion in cash already sitting on Yahoo’s balance sheet.)
Just to stress, these are entirely speculative options. We reached out to Yahoo for comment, but (unsurprisingly) did not get any response. At any rate, here is what she could do:
Buy AOL
A tie-up between Yahoo and AOL has been talked about for years (paywall), although Yahoo flat out denied any interest as recently as two months ago. It is not a particularly inspiring option, and talking to observers, you do not get the sense it would excite people. Yahoo is still the second-biggest digital property in the US, according to the latest numbers from comScore. Its problem isn’t traffic, it is making money from its traffic. And it’s not clear how buying AOL, the owner of the Huffington Post and a bunch of other websites, would change that.
Still, the talk won’t go away and, yesterday, AOL shares even shot up on vague analyst speculation that it would make sense. Jefferies internet analyst Brian Pitz has been pushing the idea for years but now thinks it might be difficult.”The complicating factor of Marissa in the CEO seat now makes it much more challenging as we are not sure [AOL CEO] Tim [Armstrong] is ready to give up the post to Yahoo,” he tells Quartz in an email. “But anything could happen, especially if it would make an Alibaba divestiture tax free” Pitz said that while a tie up makes sense on paper there would likely be many other complicating factors, including board approval, cost savings, and of course, agreeing a price.
Buy Yelp
Earlier this year, Yahoo was linked with Yelp by Re/Code’s well-connected editor Kara Swisher. The companies went on to establish astrategic partnership, which may mean there is no reason for Yahoo to consider an acquisition anymore. The other problem: Yahoo probably can’t afford it. Yelp is currently valued at about $5.5 billion by the stock market. Assuming a decent takeover premium and you get pretty close to wiping almost all of Yahoo’s cash.
Continue the acqui-hire binge
Yahoo has actually bought about 40 companies since Mayer took over. The only one that was significant from a shareholder perspective was its$1.1 billion purchase of the blogging platform Tumblr. For the most part, the rest have been acqui-hires of engineers and product managers, acquisitions Yahoo thinks have helped solve its talent problem. But it would take a long time to burn through all of its money by sticking to small deals like these, and not do anything to help its revenue problem.
Buy something in advertising technology
Yahoo has talked at length about helping make the complicated online-advertising world easier to navigate and took steps to reboot its ad technology business earlier this year. Video-ad technology startups are among the speculated possibilities. Valuations are relatively cheap and companies actually generate revenue.”The good news about ad tech is there are a lot of real businesses,” Pivotal Research Group’s Brian Wieser told Reuters yesterday.
Actually, this sounds quite sensible.
All the irresponsible things Marissa Mayer could do with Yahoo’s Alibaba IPO windfall – Quartz.
