If you’ve ever been made redundant, you know the difficulties that come with it. Your lump sum, if you even qualified for one, runs out way faster than you though it could, getting back into the jobs market isn’t easy when you’re middle-aged, and filling your days after decades in the workforce can be incredibly difficult. One redundancy won’t face those problems, however, after Yahoo! Inc. (NASDAQ:YHOO) furnished him with a $58 million package.
Henrique de Castro, who was let go from Yahoo! Inc. (NASDAQ:YHOO) last January, probably won’t be running out of that lump sum any time soon; he hardly needs to get back into the workforce given his pay day, and filling your days may just be a little easier with $50 million in your back pocket. Unfortunately de Castro’s package isn’t available to the ordinary employee, even at Yahoo. He, apparently, earned his reward by spending 15 months as the company’s COO.
Yahoo pays $58 million to lose Chief Operating Officer
Yahoo! Inc. (NASDAQ:YHOO) is cash rich at the moment because of its stake in Chinese e-commerce company Alibaba. The firm’s use of that cash hasn’t impressed investors, however. The company spent $1 billion on Tumblr, a social blogging site popular with teenagers, a move which made few investors happy, but the $58 million payout may be the biggest waste of cash yet.
Over at Businessweek that $58 million paycheck. According to the publication, the executive managed to exit the company at just the right time. Apparently his severance package was based on two major metrics, the performance of Yahoo! Inc. (NASDAQ:YHOO) stock, and the performance of the company itself.
When the Chief Operating Officer got fired Yahoo! Inc. (NASDAQ:YHOO) was at a high. The company’s Alibaba unit has delivered significantly high returns, driving the value of the company to its highest level since 2005.
Yahoo performance still reliant on Alibaba
Alibaba is the driving force behind the success of Yahoo! Inc. (NASDAQ:YHOO) in recent months, as evidenced by the performance that led to the $58 million paycheck for the company’s former COO. The problem for investors is coming in the form of that company’s IPO.
Yahoo will not sell its entire stake in Alibaba in the coming offering, but it will sell close to half of its shares in the company. Right now a lot of investors are holding Yahoo! Inc. (NASDAQ:YHOO) stock because it is just about the only way to get exposure to the success story that Alibaba has become, after that IPO there will be no reason to do that, and the premium on Yahoo shares is likely to compress.
On today’s market Yahoo! Inc. (NASDAQ:YHOO) shares fell by more than 1%. As Alibaba heads toward IPO to pressures, that to bet on the company and that to leave the indirect exposure to the stock, will battle in valuing the company.