Morningstar | Altaba to Liquidate Its Holdings; Lowering FVE to $88 per Share
Altaba announced today that it plans to liquidate its holdings and close down the fund. While it is not yet clear how Altaba will distribute its net assets to the shareholders, based on a 50/50 assumption of a cash or shares of Alibaba (the firm's main holding) distribution, we reduced our valuation of Altaba to $88 per share from $98.Neither we nor management is certain yet how such liquidation will take place. Based on the latest Alibaba market price, Altaba management believes that net assets of the fund can be valued between $76.62 and $79.22 per share, of which the midpoint is $77.92. In our view, there could be upside to such a valuation if Altaba shareholders received Alibaba shares as Morningstar's fair value estimate of those shares is 36% above where they are currently trading. If Altaba were to distribute Alibaba shares to its shareholders, then we think the value of those shares would be based on where Morningstar values Alibaba, which is $240 per share. Such an assumption could result in Altaba shares being worth $98 per share. Assuming the same probability that Altaba would either liquidate by selling Alibaba shares or by distributing them to shareholders, the new probability-weighted fair value estimate of Altaba is $88 per share.
In the proxy filed today, Altaba did not indicate when its Special Meeting will take place as it seeks shareholder approval of its liquidation and dissolution plan. Nor did the firm say that if approved, when the entire process will be completed.
Altaba is a publicly traded, non-diversified, closed-end management investment company. The company's investment objective is to seek to increase the price per share at which it trades relative to then-existing values of its principal underlying assets (the Alibaba Group Holding Limited (Alibaba) ordinary shares and American Depositary Shares and Yahoo Japan Corporation (Yahoo Japan) shares of common stock). In addition to the Alibaba shares and Yahoo Japan shares, the company also owns investments in certain additional companies Excalibur IP, LLC, which owns a portfolio of patent assets and short-term investments.
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