Microsoft Corp. [MSFT] better not be hoping to acquire Yahoo! Inc. [YHOO] in order to snag the company's stake in Chinese Internet commerce company Alibaba Group. Published reports indicate Alibaba is seeking investors to buy the 39% stake in the company held by Yahoo!. In 2005, Yahoo! rolled its Chinese operations into Alibaba and invested $1 billion in the operation for its stake.

Alibaba believes the 2005 agreement with Yahoo! gives it first dibs on acquiring Yahoo!'s stake if Microsoft succeeds in acquiring the company. It has hired Deutsche Bank and Wachtell, Lipton Rosen & Katz to advise it on its options.

Yahoo!'s investment paid off in a big way when Alibaba Group's Internet subsidiary Alibaba.com went public last November. Its shares soared nearly 200% in their debut, to $HK39.50, and its first-day valuation was $25.4 billion, valuing Yahoo!'s stake at $7.8 billion. But that was then, and this is now. Shares of Alibaba on Wednesday were trading at HK$13.86 after trading below their IPO price of HK$13.50 on Tuesday. Its market capitalization stands at roughly $9 billion, meaning Yahoo!'s stake has shrunk to around $2.8 billion. - David Shabelman

See March 19 story from Reuters
See March 19 story from The Wall Street Journal
See November 2007 story from Tech Confidential
See March 19 post from Sramana Mitra
See March 19 post from Wired