Yahoo is said to abandon plan to spin off Alibaba stake

Rather than spin off one division, Yahoo will spin itself off into a separate, publicly traded holding company that will contain Yahoo’s core business and its stake in Yahoo Japan.

On a conference call with analysts Wednesday, CEO Marissa Mayer explained that if Yahoo chose the more direct strategy of giving Alibaba shares to investors, then both Yahoo and investors would have to pay taxes. Yahoo faced pressure from activist investor Starboard Value LP to sell the core business rather than proceed with the planned spin-off of its $30 billion stake in Alibaba.

However, the company’s revenue is reportedly at the same level as when she arrived and many of her initiatives, including original video programming, digital magazines and silent video-messaging app Livetext, have yielded disappointing results. Shares in the newly hatched company would then be distributed to Yahoo shareholders, a process that could take a year to complete.

Shares of Yahoo rose 85 cents, or 2.4 percent, to $35.70 before the market open. They have fallen 31 percent this year through Tuesday. On CNBC he said the move to create a new Yahoo independent of Alibaba would, or at least could “return this great company to an iconic place where it belongs”.

Mayer said she believes Yahoo’s Internet business in significantly better shape than when she arrived, largely because it is pulling in more traffic and advertising in the increasingly important smartphone and tablet market.

The core Yahoo assets could attract a valuation of $3.5 billion or more, depending on the buyer, according to CRT Capital Group analyst Robert Coolbrith.

What’s a Reverse Spin-Off?

When looking at the daily charts for Yahoo Inc., the stock has been trading in a broad trading range over the last couple of trading session.

Verizon chief executive Lowell McAdam said his firm, which recently acquired the faded online star AOL, sees some potential for some of Yahoo’s assets. The revised plan calls for the Yahoo Japan holdings to move into the new company that will house its Internet operations.

Despite this, Yahoo.com is still the fifth most visited website in the world.

Yahoo also filed an 8K regarding Max Levchin’s resignation from its Board of Directors.

Pulling back from the spinoff of its Alibaba stake is a significant change for Yahoo executives who had stood by the deal even as questions were raised about whether it could escape scrutiny from the Internal Revenue Service. “The spin that was going to happen in January was going to happen in a timely manner”. That implies that investors had been buying Yahoo stock as a proxy for buying Alibaba stock, which appears to have been the case. With its core Internet business struggling, this stake is essentially what Yahoo’s shareholders are clinging onto.