Stock market analysts marked down Yahoo this week on news that the strategy for China was unclear. Shares fell 7% in a day when the portal stated it was “engaged in ongoing discussions” about the future of its stake in Alibaba. This came after the Chinese ecommerce business sold control of its Alipay payment platform to a firm with a majority ownership by its CEO Jack Ma. The transfer of ownership seems likely to be a result of incoming regulations about Chinese internet firms and the market reaction typifies both the current risks facing internet stocks in China and uncertainty over the future of non-Chinese brands.
Yahoo! owns a 43 percent stake in Alibaba and an estimated 40 percent share of Alipay. But on Tuesday, Yahoo filed paperwork notifying the US Securities and Exchange Commission that ownership of the Alipay service was shifted to a Chinese company owned mostly by Alibaba chief executive Jack Ma.
The restructuring was done “to expedite obtaining an essential regulatory license,” Yahoo! said in the filing.
The license purportedly at issue was one required by the People’s Bank of China to offer financial services in that country, according to an investors note from Citi analyst Mark Mahaney.
The Chinese bank’s deadline for obtaining the necessary license is reportedly September, prompting curiosity as to why Alibaba moved so quickly to get Alipay stock away from Yahoo!.
Yahoo! said that it and Alibaba investor Softbank were involved in discussions regarding the restructuring and “appropriate commercial arrangements” related to Alipay.
Those discussions likely involve how the investors should be paid or otherwise compensated for lost stakes in the online payment service, according to analysts.
Some analysts saw the drop in Yahoo! stock as a buying opportunity, reasoning that the Alipay move was in response to government regulations and that Yahoo! would be compensated accordingly.