Yahoo executives said on a conference call they still believed the original spinoff would have been tax-free but the specter of a big tax bill had unnerved investors, depressing the company’s stock price. Now, Yahoo plans to create a new company that is comprised of all of Yahoo’s assets and liabilities other than the Alibaba stake.
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Speaking in the announcement, Mayer said of what’s in store for the next year: “In 2016, we will tighten our focus and prioritise investments to drive profitability and long-term growth”.
After three days of debates, Internet search firm Yahoo Inc has shelved plans to spin off its stake in Chinese e-commerce giant Alibaba Group Holding.
Jeffrey Smith’s Starboard Value raised concerns about the tax status of the Alibaba spin in a November letter, and urged Yahoo! to explore a sale of its core business.
This video includes images from Getty Images.
Despite Yahoo insisting on Wednesday that its Alibaba spin-off would have been tax free to the company and its shareholders, the Internal Revenue Service had refused to offer any guidance on whether this would have been the case.
With Yahoo exploring a separation of its core business, the world may soon know what the company minus its lucrative stake in Alibaba is worth.
“We certainly appreciate simplicity, but the Alibaba shares would be taxable to Yahoo and would result in further taxation to our shareholders, so there would be double taxation”, said Mayer.
It may have declined, but with that much EBITDA, Yahoo’s core business can not be worthless.
In a interview on CNBC later on Wednesday, in which Webb appeared alongside Mayer, Webb re-iterated his faith in the CEO.
Yahoo’s Chief Financial Officer Ken Goldman, also on the call this morning, said that spinning off Yahoo’s core Internet business is expected to require third-party consents, shareholder approval and filings and clearance from the Securities and Exchange Commission.
Over the past year, Yahoo shares have dropped 30%, but in premarket trading on Wednesday were up 2.2%. The reverse spin-off is complex and could take a year or more to execute.
AT&T Inc and Verizon Communications Inc could be possible buyers for the Internet business, FBR Capital said.
With Yahoo hanging in limbo, prospective bidders could emerge for the company’s Internet operations, which Wall Street has been valuing at next to nothing.
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Instead of proceeding with the Aabaco spin, Yahoo has made a decision to reverse course and instead spin off its core business.
