Einhorn dumps stake in Yahoo

David Einhorn's Greenlight Capital hedge fund has sold its position in the Internet giant at a loss.

By TheStreet Staff Jul 8, 2011 2:11PM

By Robert Holmes, TheStreet

 

David Einhorn's hedge fund Greenlight Capital has sold out of its position in Yahoo (YHOO) at a loss following the Internet search giant's dispute over the ownership transfer of Alibaba's online-payments business Alipay.

 

In a letter to shareholders Friday, Einhorn said his initial purchase of Yahoo was "based on a sum of the parts analysis," which included putting substantial value on the company's Chinese assets. Following the dispute over Alibaba, Einhorn says the hedge fund "exited with a modest loss," saying that the finger pointing by involved parties "wasn't what we signed up for."

 

Greenlight's sale of Yahoo comes only two months after the hedge fund took a stake in the Internet search company. Shares are down nearly 15% since setting a 52-week high of $18.84 on May 6 after Einhorn disclosed his position. In Friday's letter, Einhorn acknowledges that Greenlight Capital's fund is down 5% this year, underperforming the market.

A spokesman for Greenlight Capital declined to comment for this story. Stock-news Web site Zero Hedge initially reported the news on Twitter at 8 a.m. ET Friday.

 

When Greenlight Capital disclosed its new position in Yahoo in May, Einhorn called Alibaba the company's "most valuable asset" in a letter to the hedge fund's shareholders. Einhorn added that he "wouldn't be surprised" if the stake was "ultimately worth as much as Yahoo's entire current market value."

 

Yahoo owns a roughly 40% stake in Alibaba, and the company currently has a market value of $20.3 billion. Einhorn acquired 8.5 million shares of Yahoo during the first quarter, translating to a position of $142 million, or 2.8% of his total long portfolio as of March 31.

Shortly after Einhorn's ownership disclosure, Yahoo shares plummeted on news that Alibaba transferred ownership of Alipay to a new company owned by Alibaba CEO Jack Ma last year. Yahoo was not informed of the transaction until March 31. Yahoo and Japan's Softbank are reportedly locked in negotiations with Alibaba to resolve the dispute.

 

Shares of Yahoo were down 1.7% to $15.54 Friday afternoon.

 

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1Comment
Jul 8, 2011 4:20PM
avatar
Jerry Yang was sleeping under the boardroom table when  Alipay was handed over to a new company without anybody else at Yahoo knowing it. When asked how this could be he blamed it on the language barrier. "I don't understand a thing those chinese say because they talk like they have a mouthful of rice". Go back to sleep Jerry, you were asleep when Microsoft offered $28 a share and you are still asleep today. You are sitting at $15 now and headed lower.
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