Yahoo loses major investor Einhorn over Alipay dispute

Yahoo is apparently losing the faith of some of its investors as its dispute with China’s Alibaba drags on: Greenlight Capital head David Einhorn has unloaded his stake in Yahoo just a few months after acquiring a sizable holding in the company. And Einhorn’s reason for getting out of Yahoo is nothing other than Alibaba’s transfer of online payment service AliPay to a new entity with full Chinese ownership.

Einhorn’s interest in Yahoo was comparatively recent, and Greenlight indicated it unloaded the investment at only a “modest loss.”

“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,” Einhorn wrote to investors. “This wasn’t what we signed up for. We exited with a modest loss.”

Yahoo’s share price declined significantly in the wake of an an abortive hostile takeover attempt from Microsoft back in 2008. That protracted corporate sideswipe left long-term investors concerned over Yahoo’s future; the ongoing dispute with Alibaba has also had a negative impact on Yahoo’s stock price.

Back in May, Yahoo announced to investors that China’s Alibaba—in which Yahoo owns a 43 percent stake—had spun off the online payment service Alipay into a separate entity with Chinese ownership. Yahoo says the transaction was carried out without the approval of Alibaba’s board—which would include Yahoo—while Alibaba says it had told everyone about the impending changeover way back in mid-2009.

The companies say they’re committed to working out a resolution—and Yahoo CEO Carol Bartz is firm that Yahoo will be “appropriately compensated” for the Alipay spinoff—the companies have been mum on the status of negotiations for over a month.

Yahoo’s stakes in Alibaba and Yahoo Japan are now seen as the most valuable parts of the company: where Alibaba and Yahoo Japan are showing strong revenue, Yahoo’s other online operations have struggled against competitors like Google, Microsoft, and Facebook.