Yahoo has announced that it is no longer pursuing plans to spin-off its stake in Alibaba, the Chinese e-commerce giant.
Yahoo Shelves Alibaba Spin-off Plans, Set to Create New CompanyThis announcement is a contradiction to the strategy Yahoo announced at the start of this year to spin-off its 15% stake in Alibaba. Most of Yahoo’s $33bn value comprises of its Alibaba shareholding.
Following this decision, Yahoo’s core internet business will be created into a new company that will be listed on the stock market. A pro-rata method will be used to allocate shares of the new company to Yahoo investors.
In 2005, the company bought 40% of Alibaba for $1bn. Presently, the value of this shareholding is $1bn.
According to Marissa Mayer, Yahoo Chief Executive, the new plan to create a separate company for its internet operations would ensure that the internet business was valued accurately.
Mayer also said that she was keen on taking action to tighten the company’s focus and to drive growth through investments.
Details about the new move will be made available toward the end of January 2016 during Yahoo’s announcement of its fourth quarter results.
US authorities say no tax-free plans
Plans to spin-off the Chinese e-commerce giant seemed to hit an obstacle in September when US- tax bodies declined Yahoo’s requests to determine whether it would be possible to spin-off without tax implications.
If US authorities determined that the spin-off would be taxable, Yahoo investors could have paid billions of dollars.
According to market analysts, Yahoo’s move to create a new company could be an easier method of selling its internet business, which includes online advertising, mobile apps and websites estimated to be valued at between $3bn and $5bn.
While Yahoo’s internet business could still be valuable given the company’s large global audience and leadership in online advertising, many analysts are skeptical of Mayer’s capability to make Yahoo more competitive.