In February 2016, President of Investment Research at Valuentum penned an open letter to Yahoo’s CEO Marissa Mayer. In it, he said a combination of Yahoo-eBay would be substantially value-creating for shareholders. eBay’s stock has advanced 50%+ since that letter.

By Valuentum Analysts

We don’t write letters to CEOs often, but when we do, we have good reason.

In February 2016, Yahoo (YHOO) had been under major pressure to monetize its stake in Alibaba (BABA), and CEO Marissa Mayer had faced continuous and tremendous criticism during her tenure. Working under the assumption that Yahoo wanted to monetize its stake in Alibaba at that time and put cash to work, President of Investment Research at Valuentum Brian Nelson wrote in an open letter to CEO Marissa Mayer reasons why Yahoo’s combination with eBay (EBAY) made sense, not the least of which was eBay’s cash-rich business model that could be used to transform Yahoo-eBay into a forward-leaning Internet giant. The Business Insider interview can be found here.

Since that time, eBay’s shares have rallied a whopping 50%+, and we posit that if Yahoo and eBay had combined, the synergies from the transaction, both impacting the top and bottom line, would have resulted in even more market value creation. Furthermore, the combination would have created, in our opinion, another Internet powerhouse to compete with the likes of Facebook (FB) and Google (GOOG, GOOGL) and may have put in place effective strategies to expand successfully against e-commerce behemoth Amazon (AMZN). Not all was lost at Yahoo, however.

By Yahoo changing its mind, and effectively deciding to hold onto its Alibaba stake, instead of monetizing it (the assumption we had been working under), Yahoo reaped the benefits of Alibaba’s robust equity price advance and an unlikely suitor for its core properties in Verizon (VZ), which continues to hope to generate value by combining Yahoo’s core with legacy AOL, which it also acquired. Yahoo and AOL will be combined under Verizon’s digital arm called Oath. We think Verizon is way over its head with its wheeling and dealing, and we’re already starting to see cracks in Verizon’s credit quality, something that we warned about years ago in 2013. We believe Verizon may have inherited the “curse of AOL,” much like Time Warner did during the dot-com bubble.

We wanted to follow up on the open letter we wrote. Though Yahoo likely chose the best path itself by changing its mind and not monetizing its Alibaba stake and keeping Verizon interested in buying its core properties (despite news of ongoing data breaches), we posit if Yahoo had purchased eBay (without using its Alibaba stake as currency), Yahoo would have been in even better shape. Unfortunately, we think the Yahoo properties in the hands of Verizon may eventually waste away, as Verizon is far too large of an entity to throw considerable capital at innovating AOL/Yahoo (Oath) to make such investments worthwhile, in our view. We’re concerned because we’ve already witnessed considerable deterioration in the all-important Yahoo Finance property, for example, and this even before the completion of the Verizon/Yahoo deal.

By the Yahoo executive team not deciding to combine forces with eBay, the scenario outlined in the Nelson letter, the world may have lost out on another Facebook or Google, a company that could have made as equal or greater impact on humanity as these tech titans. We still give Yahoo a lot of credit, however. Holding onto its Alibaba stake and letting it ride higher proved to be a better move than monetizing it. Retaining the stake and buying eBay would have been even better though, in our view. It could have potentially spun out the combined eBay/Yahoo as a new company at a substantial premium, for one. Verizon may have even bought that combination at a sharp mark up, too. After all, there was seemingly nothing that would have stopped Verizon from consummating its transaction with Yahoo, no matter how much bad press or how many data breaches there were in the news.

Overall, Yahoo shareholders did well, with Yahoo’s equity now approaching $50 at last mark, effectively a post-dot-com bubble all-time high. Yahoo’s deal with Verizon is set to close in June, and the part of Yahoo after its core properties are sold to Verizon (an investment company largely composed of the Alibaba stake) will be renamed Altaba. Congratulations Marissa! We hope you enjoy your retirement and your huge pay day. Anytime an executive can walk away with shares of their company near 10+ year highs, she did a lot of things right, even if things didn’t go perfect or as planned.