To expedite obtaining an essential regulatory license, the ownership of Alibaba Group’s online payment business, Alipay, was restructured so that 100 percent of its outstanding shares are held by a Chinese domestic company which is majority owned by Alibaba Group’s chief executive officer. Alibaba Group’s management and its principal shareholders, Yahoo! and Softbank Corporation, are engaged in ongoing discussions regarding the terms of the restructuring and the appropriate commercial arrangements related to the online payment business.

That little phrase was buried on page 8 of Yahoo’s latest 10-Q filing with the SEC. But it’s the main reason why Yahoo shares plunged nearly 7% Wednesday.

As of midday, more than 75 million shares traded hands — more than three times its average daily volume. That made yahoo the second-most actively traded stock on Nasdaq, trailing only the uber-liquid Sirius XM.

Why do investors care so much about what seems like a bit of arcane accounting? As I wrote on CNNMoney last week, Alipay and other China assets that Yahoo has invested in are what’s driving the stock higher. Any fears that Alibaba may wrest more control of Alipay (kind of like China’s PayPal) and Taobao (China’s eBay … even though eBay also owns PayPal) have to make Yahoo longs nervous.

Yahoo CEO Carol Bartz and Alibaba CEO Jack Ma have not exactly seen eye-to-eye lately. It’s a complicated relationship. But one thing is clear. If Yahoo can’t find a way to actually make money off its China assets, Yahoo goes back from being a cheap, stealth version of Baidu or Sina to an overvalued also-ran to Google and Facebook in a heartbeat. That’s why the stock is getting killed. — Paul 

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