Chinese ecommerce giant Alibaba has just closed an initial repurchase of shares from Yahoo! for the value of $7.6 billion. We’ve known since May that Yahoo would be reducing its stake in Alibaba, and now this deal is moving in full-force.

At the moment, only 20% of Yahoo’s 40% stake in Alibaba has been repurchased, and of this, Alibaba reports that Yahoo received the following in return: approximately $6.3 billion in cash and $800 million in preference shares in Alibaba Group. Compare that to Yahoo’s original investment, which consisted of $1 billion and the sale of its Yahoo! China business.

As we’ve said in the past, the original announcement reveals the removal of restrictions on Yahoo making “other investments” in China, while clarifying that Alibaba will retain the Yahoo China license:

Among other things, this amendment will result in Yahoo! granting Alibaba a transitional license to continue to operate Yahoo! China under the Yahoo! brand for up to four years, while restrictions on Yahoo!’s ability to make other investments in China will be terminated.

According to a statement from Jack Ma, Chairman and Chief Executive Officer of Alibaba Group, Alibaba will continue “working with Marissa Mayer and her team in [a] continued partnership.” It looks like this statement will apply even if additional shares are repurchased.

The decrease in Yahoo’s ownership should also pave way for an Alibaba IPO. The two companies’ agreement states that when the expected IPO takes place, Yahoo will be allowed to sell some of its remaining shares to Alibaba and the rest on the open market after a lock-up period.

Alibaba has clearly wanted to buy back Yahoo’s stake for some time, and similarly, Yahoo has wanted that extra cash. The question now is: what will Yahoo do with it? Originally, Yahoo promised to give that money back to its shareholders, but now it looks like Marissa Mayer is considering holding onto it. Either way, this is an important space to watch as the Internet giant looks to reverse its gradual decline.

Featured image: epSos .de