(Photo Credit: JD Lasica)

Yahoo’s (YHOO) 24% stake in Chinese e-commerce goliath Alibaba (BABA) has kept the company afloat through troublesome years. Many were critical of Yahoo management’s decision to sell $7.1 billion worth of its Alibaba stock back in 2012. Now that Alibaba has IPO’ed in New York, Yahoo is being forced to sell 27% of its BABA shares.

Until today, Yahoo’s stake in Alibaba was one of the main draws for investors. Other than owning shares of Yahoo or Japanese tech company SoftBank, there has been no other way for traders in the public market to get a piece of Alibaba. Now that Alibaba stock is available, Yahoo is going to need to figure out a new way to attract investors.

Over the past 4 weeks Yahoo stock has been roaring higher in anticipation of Alibaba’s IPO as the valuation of the deal continued to rise. After taxes Yahoo is going to net about $6 billion from the forced departure of its Alibaba shares. Yahoo CEO Marissa Mayer has already pledged to return half of that sum to shareholders, likely through a share buyback plan or special dividend. That leaves her with $3 billion to play with, which she will add to Yahoo’s roughly $4 billion in cash on the books, and go shopping.

(Graph from ChartIQ Visual Earnings)

After Alibaba goes public Yahoo will have just over $7 billion to spend. Thursday afternoon the year long rumor that Yahoo would be using the money to acquire AOL (AOL) surfaced again, driving AOL shares 5% higher. The speculation has been dispelled as fiction not fact, but AOL is certainly a feasible target for Marissa Mayer and crew. On crowd sourced mergers and acquisitions prediction platform, Mergerize, 30 predictions have been made so far about Yahoo, including a prediction that it may add AOL to its arsenal.

Here are highlights from the predictions and why each deal may or may not make sense.

1. AOL - Market Cap. $3.5 Billion

Why: AOL has long been rumored to be a potential takeout target for Yahoo. No longer relying on the dial up internet service we all remember from the 90s, AOL has reinvented itself as a media company, owning popular brands such as The Huffington Post, TechCrunch, and MovieFone. On paper AOL makes a lot of sense for Yahoo. There are obvious synergies between Yahoo and AOL, by merging Yahoo could reduce costs and improve operating efficiency. AOL would also give Yahoo a coveted boost to its video content and display ads, an area where it is far behind competitors Google and Facebook.

Why Not: AOL is the most conservative of Yahoo’s big ticket acquisition options, but it may not offer enough growth potential. Profits at AOL have stalled in the past 2 quarters and revenue has grown by roughly 10% over the past year. For a point of comparison, earnings per share at Yahoo have been increasing over the past two years, but revenue has been stuck. AOL makes sense on paper and the price is well within Yahoo’s range, the problem is that it doesn’t expand the breadth of Yahoo’s businesses and would require Yahoo to double down on a content strategy that has been ineffective compared to new media peers like BuzzFeed and Reddit.

2. YELP - Market Cap. $5.5 Billion

Why: Yelp (YELP) is the single most predicted takeout target on Mergerize. 8 analysts have submitted predictions that Yahoo will buy Yelp. Yelp’s mobile platform where users can search, rate, and review bars and restaurants fits perfectly into the strategy Mayer has outlined of focusing on everyday mobile engagement. Yelp is increasing its revenue by 50 to 60 percent each quarter on a year over year basis, making it a very attractive option.

Why not: Price is going to be an issue, unless Yahoo sells more shares of Alibaba. Yelp’s current market capitalization is $5.5 billion. That’s technically within Yahoo’s budget, but it’s going to be hard to convince shareholders to let go of Yelp for a premium low enough for Yahoo to afford. In June Priceline.com bought OpenTable, a peer to Yelp in many ways, at a 47% premium to the price shares were trading at on the open market. The average predicted takeout price for Yelp on Mergerize is $8.08 billion, which would be a 60% premium on the current stock price. There may be wiggle room for the two sides to come to a deal, but this one looks to be just outside Yahoo’s current budget.

3. Reddit - Private Company - Approximate Valuation $500 Million

Why: Reddit is a massively popular social content sharing platform, it’s one of the most visited sites on the web and a leader in media engagement statistics. Earlier this month Reddit launched a mobile app for its popular Ask Me Anything events (AMA), where users can ask questions and interact directly with celebrities, experts in a field, or everyday people with extraordinary experiences. Reddit’s leveragable content curation and off the charts engagement should make it attractive to Yahoo. Another plus is that the company is relatively inexpensive. This deal would leave plenty of cash leftover for Yahoo to invest in supplementary ad tech products or return more value to shareholders.

Why Not: What’s popular isn’t always profitable. Wikipedia gets insane traffic, but doesn’t operate for gains. Reddit is a tricky business, and that’s probably why this potential deal has garnered much attention.

It was reported earlier this month that Reddit will be raising $50 million on a $500 million valuation. Investors in the round of financing are rumored to include Andreessen Horowitz, a VC backer of BuzzFeed with experience in new media. If Reddit is really about to raise capital, it’s unlikely that the company would consider a buyout offer so soon. Additionally the culture and community on Reddit make monetization difficult. As VentureBeat wrote about back in 2012, the userbase at Reddit often rejects paid advertising, making it difficult for Reddit to collect as much revenue as a company of its scope and popularity ought to. Yahoo desperately needs revenue growth and while Reddit is relatively inexpensive, pushback from its community would be a significant liability in any attempted takeover.

Other Scenarios

4. Get Acquired

The three takeout targets above are some of the most common and plausible predictions made on Mergerize. But there are plenty of other possibilities in play.

Some investors believe that Yahoo is more likely to be acquired than to do any acquiring. Yahoo’s core business may be stagnant, but purchasing Yahoo could be an alternative measure for someone to get their hands on a huge chunk of Alibaba stock.

Two analysts have even predicted that after the IPO Alibaba may just turn around and buy Yahoo in a quasi share buyback that also gives Alibaba an instant presence in the United States and Japan (through Yahoo Japan).

Eric Jackson, Founder of the technology focused Ironfire Capital hedge fund and shareholder of Yahoo believes SoftBank might consider buying Yahoo. SoftBank is already an investor in Alibaba and could consolidate 50% ownership of Alibaba by acquiring Yahoo.

5. Play Small Ball

The final scenario, and perhaps greatest risk of all, would be for Yahoo to pass up on a big ticket deal in either direction. Yahoo could make several smaller acquisitions and focus on growing its own core business organically, but that hasn’t worked in nearly a decade. Marissa Mayer’s stewardship of Yahoo has been uneventful until now. But with all that cash coming into play and big decisions to make, things could get exciting in Sunnyvale soon.