Facebook Buys More Class A

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If you are counting, Facebook just bought more shares this quarter; in fact $150 million more of its Class A shares, per the most recent statement of cash flows.

That’s in addition to the $278 million in shares repurchased in the first quarter. Still, Facebook is far away from completing the $6 billion stock repurchase plan announced last fall.

Facebook surprisingly retired all the repurchased Class A shares making it impossible to reissue the shares for future acquisitions. Voting stock, like the Class A shares, is attractive since it can minimize the tax bill due in acquisitions.

Often founders selling out their appreciated stock in an acquisition would rather receive voting stock rather than cash to delay any tax bill.

 

 

Reconsidering Altaba

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It’s time to reconsider Altaba. Back in June, Yahoo became Altaba, relocated to New York City, and hired new Chief Executive Officer, Thomas J. McInerney. Yahoo is no longer a real business, but a registered investment company with a depressed stock price, that still may be worth something.  

If you own Altaba stock, then you own a collection of investments: lots of Alibaba, some Yahoo Japan, patents, and cash. And for various reasons, Altaba’s stock price does not reflect the value of its underlying assets and causes the stock to trade at a discount. New management knows this and told shareholders what it wants to do, but there is not much they really can do.

Altaba’s discount exists mainly due to the tax bill that would be incurred if the Yahoo Japan and Alibaba investments were sold. That tax bill may decrease if tax rates change under a Trump Tax plan. If capital gain tax rates come down, then the discount would narrow, and Altbaba shares would appreciate.  Given the uncertainty, some Fools say stay away from the stock.

Even without Trump, Altaba stock price could eventually appreciate if Alibaba merged with Altaba. In this scenario, Altaba shareholders would receive Alibaba stock, tax-free, in exchange for their Altaba shares. A merger of Alibaba with Altaba is one way of getting rid of the tax bill currently depressing the Altaba stock price.  

So if you currently own Altaba, may the best thing is to hold on?