How Altaba, Inc. Shares Rose 81% in 2017
What happened
Shares of Altaba (NASDAQ: AABA), gained 80.6% in 2017, according to data from S&P Global Market Intelligence. What remains of the old Yahoo! business, following Verizon's (NYSE: VZ) buyout of most of that company's assets, rode the coattails of a surging Alibaba (NYSE: BABA) last year.
So what
Altaba is in fact designed to be a proxy for investing in Alibaba directly. Yahoo! started its 15% ownership of Alibaba years before the Chinese e-commerce giant joined the public market, and found it worthwhile to keep that mojo running when Verizon picked up Yahoo!'s actual business operations. Besides a $72.8 billion stake in Alibaba, Altaba also owns shares worth $9.6 billion of former subsidiary Yahoo Japan, plus a smattering of smaller holdings. But the Alibaba interest represents 88% of Altaba's total net asset value, so the two stocks are joined at the hip.
And Alibaba had a banner year in 2017 with a 96.4% share-price jump, taking Altaba along for the ride.
Now what
Investors who own Altaba instead of Alibaba are either holdovers from the Yahoo! days who simply haven't done anything with their reformed stock holdings or they are value-minded growth investors who see the stock selling at a 30% discount to the value of its actual assets.
That large discount stems from the enormous tax bill Altaba would face if it attempted to bring its China-based Alibaba gains back to U.S. soil under current tax rules. If the company can find workarounds for that issue, or the rules change to a more favorable model somewhere down the line, early Altaba investors should be able to pocket some of that price difference.
That's a very long-term bet, however. It's not easy to find international tax loopholes large enough to take home a cool $73 billion in Alibaba holdings, and that asset is still growing at a skyrocketing pace. I'm quite content to own Alibaba shares instead, but both stocks should add plenty of value to your portfolio over the long run.
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Anders Bylund owns shares of Alibaba. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool also recommends Altaba. The Motley Fool has a disclosure policy.