It took Yahoo more than five weeks after learning of the deal to inform investors that Alibaba Group Holding Ltd., a company it partly owns, spun off its Alipay online-payment service. The revelation fueled concern that Yahoo’s stake would lose value. Institutional Shareholder Services Inc., a shareholder advisory firm, said it will review whether Sunnyvale, California-based Yahoo acted in a timely manner.

“If an asset disappears, that’s a risk,” said Larry Haverty, a portfolio manager at Gamco Investors Inc., which has about $35 billion under management. “This disappearance apparently took place long before it was announced. That would indicate to me the corporation’s risk-control procedures, which are a board responsibility, were not operating in the way that they should have.”

Yahoo, Alibaba Group’s biggest shareholder, revealed the ownership change May 10 after talks with the Chinese company aimed at getting a better understanding of the “complex situation,” it said in a May 12 statement. Chief Executive Officer Carol Bartz released first-quarter earnings on April 19, less than a month after learning of the spinoff.

The company’s disclosures were “timely and appropriate,” Yahoo said in an e-mailed statement.

Yahoo stood at the equivalent of $16.27 in German trading today as of 9:46 a.m. On May 20, the stock fell 5 cents to $16.30 in Nasdaq Stock Market trading.

Press Release?

Alibaba Group, which owns e-commerce businesses in China, helps Yahoo investors benefit from growth in the world’s largest Internet market. The 43 percent holding may account for as much as three-fourths of Yahoo’s market capitalization, according to analysts including Sandeep Aggarwal, an analyst at Caris & Co. in San Francisco. Alipay, spun off to a company mostly owned by Alibaba Group Chief Executive Officer Jack Ma, may be worth $5 billion, according to Gabelli & Co.

“A press release when they learned about it would have been better,” said Walter Price, managing director at RCM Capital Management in San Francisco, which has more than $100 billion under management, including Yahoo shares. “That would have been a better way to handle it. I think it was important.”

Alibaba Group and Yahoo said May 15 that they and Softbank Corp., Alibaba Group’s No. 2 shareholder, are “engaged in and committed to productive negotiations to resolve outstanding issues related to Alipay.”

Review

The spinoff helped Alipay comply with People’s Bank of China’s restrictions on foreign ownership of payment services.

ISS, which advises on corporate governance issues, plans to review the disclosure as it compiles a report ahead of the company’s annual shareholder meeting, scheduled for June 23, said Ted Allen, a spokesman for Rockville, Maryland-based ISS.

“We’re certainly going to look into the matter,” Allen said. “It’s certainly safe to say disclosure is an important issue for shareholders.”

The disclosure kicked off disputes between Yahoo and Alibaba Group over when Yahoo learned of the sale and whether Alibaba Group has been compensated for the loss of Alipay. Alibaba Group said its board, which includes Yahoo co-Founder Jerry Yang and Softbank President Masayoshi Son, was informed of a transfer of Alipay equity almost two years ago.

Yahoo said in a press release that it did not know of the transfer until March 31, after the spinoff was complete.

‘It’s a Mess’

“It’s a mess,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “They were just as surprised as the rest of us. You’ve got to give them some slack there.”

Some investors didn’t understand what happened with the asset after initially reading the disclosure, said Ben Schachter, an analyst at Macquarie Capital in New York with a “neutral” rating on the stock. investors must now wait to find out what kind of compensation the company receives for Alipay.

“They’re now negotiating the value of the compensation they’re going to receive for something they no longer own,” said Schachter, who doesn’t own the stock. “That’s not a particularly good place to be negotiating from.”