The New York Times is reporting that Yahoo tomorrow will consider a proposal to sell its stakes in Yahoo Japan and Alibaba Group, in a transaction that would be worth approximately $17 billion. But here’s the thing: Yahoo’s entire market cap is just over $18 billion.

Does that really mean Yahoo YHOO itself is only worth around $1 billion? That puts it in the same league as AOL AOL — despite having more than twice the revenues — and that’s not exactly a league where anyone wants to be playing right now.

From the NY Times:

Under the current proposed terms, Alibaba and Softbank, Yahoo Japan’s majority owner, would create new legal entities that would consist of both cash and certain operating assets. Yahoo would then swap out most of its stake in Alibaba and all of its stake in Yahoo Japan for these entities, effectively selling those holdings.

Yahoo is expected to keep a 15 percent stake in Alibaba, allowing it to hold onto a piece of the fast-growing Chinese Internet company, one of these people said. The proposal values Yahoo’s entire Alibaba stake at about $12 billion and its stake in Yahoo Japan at about $5 billion.

Were Yahoo to reject the deal, then Alibaba and Softbank may proceed with a previously-discussed bid to buy all of Yahoo, in concert with private equity firms Bain Capital and The Blackstone Group BX . It also may accept one of two competing minority stake offers led by Silver Lake Partners and TPG Capital.

But back to the dollar amount. Is it really possible that Yahoo would be valued the same as company that generate half the revenue? Can a company’s non-core assets be worth 17x their core business? We should know soon. In the meantime, Yahoo shares have spiked more than 6% on the report.

Update: Some readers have pointed out that Yahoo currently has $2.11 billion of cash sitting on its balance sheet. Does that somehow make the value of its U.S. assets negative? Something seems very wrong here…

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