Matt Levine, Columnist

Alibaba Could Buy Yahoo for Free

It is dumb math but there it is. Alibaba gets Yahoo for nothing. Yahoo shareholders are made better off than they are now.

September 22, 2014 at 9:05 PM UTC

By Matt Levine

Matt Levine is a Bloomberg Opinion columnist. A former investment banker at Goldman Sachs, he was a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz; a clerk for the U.S. Court of Appeals for the 3rd Circuit; and an editor of Dealbreaker.

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Here is a dumb trade:

So that trade gets Yahoo shareholders out of their stock at a premium. A smallish premium but still. On the other hand, for Alibaba, it costs precisely nothing. I mean, Alibaba has to put up 384 million shares of stock and $7 billion in cash. But Yahoo actually has 384 million Alibaba shares and $7 billion in net cash. So once Alibaba owns Yahoo, it'll get those things right back. So it costs nothing.