Bloomberg News

Einhorn’s Greenlight Sold Yahoo Stake After Alipay Spinoff

July 08, 2011

(Updates share prices in seventh, tenth paragraphs.)

July 8 (Bloomberg) -- Greenlight Capital Inc., the hedge fund run by David Einhorn, sold its stake in Yahoo! Inc. for a “modest loss” over doubts surrounding the value of the company’s investment in China-based Alibaba Group Holding Ltd.

Greenlight said in a letter dated yesterday that it didn’t sign up for “the finger pointing that started going in every direction” after Yahoo disclosed that Alibaba had ceded ownership of its online-payment business to a company controlled by Alibaba Chief Executive Officer Jack Ma.

“The value of the Chinese assets came into doubt as the CEO of the Chinese unit hived-off a valuable subsidiary into a corporation that he personally controls,” Greenlight said in the letter.

Alibaba Group, which owns e-commerce businesses in China, helps Yahoo benefit from growth in the world’s largest Internet market. Yahoo, Alibaba’s biggest investor, and Japan’s Softbank Corp., another shareholder, have made “encouraging progress” in talks toward an agreement over compensation for the payment unit, Alipay, the companies said in a June 21 statement.

Dana Lengkeek, spokeswoman for Yahoo, declined to comment.

Greenlight said in April that it bought a stake in Yahoo, anticipating that the China unit stake may be worth as much as the company’s entire market value. Yahoo “has taken some increasingly shareholder-friendly steps,” Greenlight said in a letter at the time.

Yahoo shares have lost 16 percent since May 10, the last day of trading before the Alibaba spinoff of its Alipay unit was disclosed. Yahoo, based in Sunnyvale, California, fell 20 cents to 15.61 at 4 p.m. New York time on the Nasdaq Stock Market.

Xerox Stake Sold

In the letter yesterday, Greenlight also said it sold its stake in Xerox Corp. Greenlight said it bought shares last year based on anticipated earnings from the Affiliated Computer Services acquisition. The March earthquake in Japan “took the upside out of our earnings forecast,” Greenlight said, spurring a sale of the shares at a “modest gain.”

Bill McKee, spokesman for Xerox, declined to comment.

Xerox, based in Norwalk, Connecticut, dipped 2 cents 10.66 in New York Stock Exchange trading. The stock has dropped 7.5 percent this year.

--With assistance from Kelly Bit in New York. Editors: Lisa Rapaport, Nick Turner

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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