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YAHOO Is Worth What You Say?

|Includes: Altaba, Inc. (AABA), GOOG, MSFT

I've been hearing that Alibaba (HKSE: 1688.HK ), Microsoft (MSFT) , Google (NASDAQ:GOOG) and a slew of private equity firms want to buy Yahoo (YHOO); well, I hope it's for the right price. If its near the $18 per share I've seen thrown around 'cyber space', I won't be pleased.

I would count Alibaba out as the 'sole' bidder for Yahoo for various reasons. Yahoo initially invested 1 billion in Alibaba approximately 6 years ago and the 'estimated' value of the Yahoo stake is 13 billion today. It was clearly shrewd of Yahoo to continue to own a 43% stake in Alibaba back in 2008, which at the time included Alipay, the Chinese version of PayPal for Alibaba. Yahoo holding onto their stake in Alibaba was logical even when in 2008 Microsoft had a buyout offer on the table for Yahoo.

Alibaba CEO Jack Ma clearly wants to purchase the 43% Yahoo owned stake of Alibaba, especially before an IPO for Alibaba can unleash an even further potential and more accurate valuation for his company.

Then there is the abrupt 'Alipay move' by Alibaba CEO Jack Ma. Alipay was taken from under Alibaba ownership and transferred without Alibaba board approval to Jack Ma's private Chinese company. One of the 5 board seats for Alibaba is held by a Yahoo representative Jerry Yang, former CEO of Yahoo.  Alibaba CEO Jack Ma assessed blame for the abrupt 'Alipay move' onto Yahoo Alibaba board member Jerry Yang along with the other 4 board members. This created negative sentiment and suspicion from Yahoo shareholders toward Yahoo and its potential value in its Alibaba stake. 

Whether it was the Chinese government that forced the transfer issue with Alipay or not, the 'Alipay move' had a respective and negative impact on Yahoo stock price and this would appear sufficient in preventing Alibaba from owning Yahoo today.    

Back in 2008 when Microsoft made their $31 per share offer for Yahoo, Alibaba was in it's infancy compared to today; in other words, they became worth a lot more since then. The enormous growth and dominance of Alibaba in China since 2008 appear to have more than offset the loss of Yahoo market share to its competition here in the USA. So how does the value of Yahoo go down after 3 years below the Microsoft initial offer of $44.6 billion or $31 per share if the value of the Asian assets have gained market share and value since 2008?   

OK, I get that Google (GOOG) and Facebook have taken a large chunk of market share from Yahoo, but this loss of market share has also been met with the tablet and smartphone 'gold rush' in addition to the Yahoo Asian assets growth. The exponential growth and use of mobile devises and the increased time spent on PC's rather than TV viewing are major conditions that improve the relevance (aka valuation) of Yahoo.  
The value of Yahoo on-line content, with 'top 10 shows' and the recent ABC News partnership appears to have grown in intrinsic value during this smartphone and tablet  'gold rush'.   

Is $18 per share really an accurate valuation? It seems more logical that the offers should be around or just under the $31 per share that Microsoft offered in 2008, even while taking into account the loss of market share Yahoo has had to Facebook and Google.   

If my Yahoo shares are sold for $18, I'll be joining the protests in NYC.

Disclosure: I am long YHOO, MSFT.