NewYahoo spinning off 15 per cent stake in China’s Alibaba
Shareholders feel Yahoo and its stake in Alibaba would be worth more separately, as long as the Alibaba shares are not subject to the standard 35 per cent tax rate from selling the shares
Yahoo plans to spin off its 15 per cent stake in China’s Alibaba Group Holding Ltd, responding to pressure to hand over to shareholders its prized e-commerce investment valued at roughly US$40 billion.
Shares of Yahoo rose about 7 per cent to $51.45 in after-hours trading on Tuesday, following the tax-free spinoff announcement and earnings which just beat analysts forecasts even as its revenues slightly lagged estimates.
The move to spin off the Alibaba stake satisfies a persistent investor demand, but could also ratchet up pressure on Yahoo Chief Executive Marissa Mayer to make quicker progress in strengthening Yahoo’s struggling media and advertising business.
"It’s not going to be easy from now on," said B. Riley and Co analyst Sameet Sinha. "She has to perform now. There’s nothing shielding her."
Shareholders feel that Yahoo and its stake in Alibaba would be worth more separately, as long as the Alibaba shares are not subject to the standard 35 per cent tax rate that would be incurred from selling the shares.
Yahoo was worth about $45 billion at Tuesday’s market close. That includes its Alibaba stake of nearly $40 billion, meaning the current Yahoo share price assigns little value to the core business. Some investors believe the email, website and other operations are worth between $7 billion and $8 billion.