Yahoo has dropped plans to spin off its stake in Chinese ecommerce company Alibaba, according to an announcement by its board on Wednesday. The 15 percent stake is worth more than $30 billion.
The decision came after several days of meetings when the board emerged with a new plan to spin off Yahoo’s non-Alibaba assets into a new company, according to a report by the Wall Street Journal.
Yahoo initially announced plans to spin off its Alibaba stake in January 2015, but hit some snags, including the IRS declining to issue a ruling on the tax implications, a move that was expected to delay the decision.
The “reverse spin” of the core business could save shareholders billions in taxes, the WSJ said, but it may take more than a year to execute, during which time a buyer may emerge for Yahoo’s core business.
“We believe that the previously announced spin off would be tax free to Yahoo and its shareholders,” Maynard Webb, Chairman of Yahoo’s Board of Directors said in a statement. “However, in consideration of developments since the original spin off plan was announced and after significant deliberations, we are suspending work on the Aabaco spin off. Among other factors, we were concerned about the market’s perception of tax risk, which would have impaired the value of Aabaco stock until resolved. Informed by our intimate familiarity with Yahoo’s unique circumstances, the Board remains committed to accomplishing the significant business purposes and shareholder benefits that can be realized by separating the Alibaba stake from the rest of Yahoo. To achieve this, we will now focus our efforts on the reverse spin off plan.”
The reverse spin off will require third party consents, preparation of audited financial statements, shareholder approval, and SEC filings and clearance, suggesting a mountain of paperwork ahead for Yahoo.
“In addition to our efforts to increase value and diminish uncertainty for investors, the ultimate separation of our Alibaba stake will be important to our continued business transformation,” Marissa Mayer, CEO of Yahoo said. “In 2016, we will tighten our focus and prioritize investments to drive profitability and long-term growth. A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo’s business.”
Despite Mayer’s attempts to invest in online video, ad tech, and mobile software, the WSJ reports that much of Yahoo’s $33 billion market cap still reflects its two large Asian assets, Alibaba and Yahoo Japan.