Riding on others’ coattails never ends well. While Yahoo’s share price soared in the past two years on anticipation of Alibaba’s public listing, no one cared that Yahoo’s core business was shrinking. Now that’s all changed. Alibaba is public; Yahoo’s remaining stake in it is worth $35bn (pre-tax); there are questions about its core business; and activists are circling.

The activists’ main point is undeniable: Yahoo is trading for less than the sum of its parts. Its stakes in Alibaba and Yahoo Japan are worth $35bn and $8bn, respectively, before tax. After tax at 38 per cent, these are worth $27bn. Now turn to Yahoo’s core business, which throws off $700m in free cash flow a year. At a free cash flow multiple of 13 times (level with AOL), the core business is worth $9bn. Now add $3bn in cash; $6bn from Alibaba’s IPO (after tax); and subtract $1bn in debt. Yahoo’s equity is worth roughly $44bn. But its market capitalisation is $39bn, a difference of 13 per cent. Call this the Marissa Mayer discount. Shareholders no longer trust the chief executive to create value with the Alibaba cash. Despite the acquisition spree of the past two years (which includes blogging service Tumblr and app analytics specialist Flurry) revenues are still shrinking.

Some shareholders want more of the Alibaba cash returned to them. So far, Yahoo has pledged to return half of the IPO proceeds and has not laid out a plan for the remaining stake. Starboard Value, an activist investor, wants Yahoo to stop making acquisitions, figure out a tax strategy, and merge with AOL. Yahoo’s share price rose 5 per cent Friday on the news of Starboard’s demands. Starboard believes that by combining with AOL, Yahoo might reduce the tax bill on an Alibaba stake sale. Selling itself to AOL might be awkward, though: Yahoo is twice AOL’s size in terms of earnings.