×

Under arrest (sort of): Yahoo locks up Alibaba, but stock slides

78761369CJ003_Websites_refl
Getty Images

Yahoo's move to extend its hold on its Alibaba stake was no help to the search giant's stock, which dropped nearly 2 percent in early trading Thursday.

Yahoo said in a regulatory filing on Wednesday that it had entered into a one-year lockup agreement with Alibaba after its massive initial public offering last week. Although Yahoo already sold all of its 140 million American depositary shares, the agreement will allow the tech big to retain nearly 384 million ordinary shares, or about 15 percent of what the China-based company has outstanding.

Although the $25 billion IPO was a windfall for Yahoo, the Sunnyvale, California-based company is struggling to revive Internet advertising, and revenue has slipped nearly 40 percent from its peak.

Read MoreYahoo rakes in another jackpot from Alibaba's IPO

On Thursday, RBC Capital Markets cut its rating on Yahoo to "sector perform" from "outperform," an indication that the brokerage expects Yahoo to perform in line with its peers.

Yahoo's stock was down 65 cents to $39.23 in Nasdaq trading.