Altaba finally rewards its shareholders. But the ultimate gain is uncertain.

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Altaba

made a big distribution to its shareholders Monday as part of its liquidation plan. Its shares now constitute an unusual arbitrage situation, with investor returns based on the amount and timing of future payments.

Altaba (ticker: AABA), the former Yahoo!, Paid $ 51.50 per share to its owners on Monday. Shares are trading Tuesday at $ 19.59, up 29 cents, adjusted for distribution. The stock did not decrease by the total amount of the distribution, closing Monday at $ 70.80.

It is estimated that Altaba's net asset value before distribution was approximately $ 74 per share, to $ 22.50 now. This means investors will earn about $ 3, or 15%, as the liquidation process unfolds over the next few years. However, there is uncertainty about the amount of investors in the liquidation and when the payments will be made. Most of the company's assets are now in cash and cash equivalents.

Barron wrote that retail investors should consider selling their Altaba shares because of the complexity of the situation and its relatively modest return potential, as well as potential liquidity problems. No company the size of Altaba – $ 37 billion in total on Monday – has ever been liquidated. The referees of Wall Street would be important holders of the title.

One of the main question marks is the potential taxation of Chinese capital gains on Altaba's sales of what was its most important asset, namely a 15% stake in
Alibaba Group Holding

(Baba) Investors assume that no Chinese capital gains tax will be levied. Most of the funds that Altaba currently holds are earmarked for China's potential taxes. He has also reserved about US $ 10 billion of taxes that will be paid in connection with Alibaba's share sales.

Altaba has announced its intention to make a second distribution in the fourth quarter of 2020. One or more final distributions are expected at a later date, which analysts say could be in 2022.

There are only a few Wall Street analysts covering the company. The stock is tracked by Street Arbitration and trading desks in special situations. The amount and timing of future distributions will reflect the decisions of the Delaware Court supervising the liquidation. The faster and faster the payments, the better for investors.

Wall Street analysts expect the Chinese tax authorities to decide not to impose capital gains taxes on all sales of Alibaba shares by Altaba. The Chinese have already decided not to impose on the 2018 sales of Altaba. If China sought to impose capital gains taxes, it would complicate the liquidation process and potentially reduce returns.

Nick Pappas, an analyst at Churchill Capital, recently wrote that he expected Altaba to distribute about $ 20 per share to the holders by the end of 2020, with the rest arriving at a fixed date. after the Delaware court is satisfied that all potential liabilities have been resolved. "We believe that any further distribution can take several years to be paid," he wrote.

The complexity of the situation in Altaba comes from the fact that the company is planning to file a certificate of dissolution in Delaware on October 4th. The shares will be delisted from the Nasdaq stock after that date. Stocks are expected to continue trading over the Pink Sheets thereafter. Pink Sheets are less liquid than Nasdaq. The company announced Tuesday that it would ask the custodian company to continue keeping shareholder registers, thus allowing the transfer of the rights of liquidation, probably on pink leaves.

The liquidation plan, announced by Altaba in April, is a long story for Yahoo !, one of the leading Internet companies during the Internet business boom in the late 1990s. While Yahoo! Weakened, the company quickly invested in Alibaba, which turned into an extremely valuable stake in China's e-commerce society. Under investor pressure, Yahoo! sold its internet business to
Verizon Communications

(VZ) in June 2017, after which she changed her name and now calls Altaba.

At the time, the intention was to maximize the value of the remaining assets of the company, mainly the 15% of Alibaba, as well as a much smaller stake in
Yahoo Japan

(4689.Japon). As CEO, Tom McInerney, Altaba has sold the vast majority of shares of Alibaba and all of Yahoo Japan.

Write to Andrew Bary at [email protected]