Yahoo Ditches Alibaba Spin Off, Creates New Company For Asset Transparency

Yahoo’s assets and liabilities would form a separate public company, “the stock of which would be distributed pro rata to Yahoo shareholders”, Yahoo wrote in its press release.

It’s that way with Yahoo (YHOO), whose board of directors on Wednesday scrapped plans to spin off Alibaba – the company cash cow – and create a new company. In what sounded like a pre-written response to an obvious question, Yahoo chairman Maynard Webb said there is “no determination by the board to sell the company or any part of it”. A hedge fund called Starboard Value said in November that selling Yahoo’s main assets would incur less taxes than the $10 billion that the company would have to pay if it sold its 15 percent stake in Alibaba. The IRS told Yahoo earlier this year that it would not rule on whether the company could avoid a tax hit when putting its stake in a separate entity, which it planned to name Aabaco.

As far as major corporate business goes, this week for Yahoo has had more plot twists than a M Night Shyamalan movie, as it decides to stick with its Alibaba stock, splitting the company in two.

Yahoo might be in deep financial trouble, but it might not be so desperate yet so as to divest itself of what remains of its core businesses and assets. He also believes that Yahoo could have “substantial investment basis” in connection with the many acquisitions it has made since CEO Marissa Mayer took the helm.

As it stands, Wall Street assigns nearly no value to the core of Yahoo, with a total market capitalization of $35 billion, after backing out the Alibaba piece.

Yahoo! also revealed Wednesday that Mayer’s pal, Max Levchin, the co-founder of Paypal, is exiting the board to focus on his new consumer finance venture, Affirm.

“Prior to several years ago, this company had gone through a number of CEOs, you could argue with results that were challenged as well”, he said.

Yahoo has thrown out plans to spinoff their share in Alibaba, worth about US$31 billion.

The deal, which would require shareholder approval, could take more than a year to complete, Yahoo said.

So, why not just distribute the Alibaba shares and let people deal with paying taxes? Starboard had previously supported the spinoff.

Yahoo’s stock on the new plan would be $40 per share, compared with $32 under the original strategy, according to an investment note by Citigroup analyst Mark May, as reported by The New York Times.