Yahoo shares rise on reports of sale

Fully taxed Alibaba spinoff: This is the scenario investors are anxious about, and Squali estimates that the value of Yahoo’s various parts would be worth a total of only $37.43, a scant 3.9% upside to where the stock is now trading.

Marissa Mayer, who became the president and CEO of Yahoo in July, 2012, was brought in to turn around the financially-strapped company, but her efforts have not instilled much confidence in Wall Street.

“And so are rumours that the board of the Silicon Valley internet giant is poised to sell off the entire core business”, she said. Alibaba would be interested in buying its shares that Yahoo owns, but only at a steep discount, Wong added, citing a source.

Interested bidders could range from private equity companies attracted to Yahoo’s still-huge base of customers to technology companies eager for Yahoo’s mobile and web content, following the model of Verizon Communications Inc (VZ.N) buying AOL.

Naturally, Yahoo isn’t commenting on any of this. “The company’s core business is in seemingly permanent decline”.

Yahoo has said it wants to proceed with the deal anyway, and close it this month.

Yahoo’s core business could be worth about $1.9bn, not including about $5.8bn in cash expected at the end of next year, along with some growth assumptions, Brian Wieser, an analyst with Pivotal Research Group, wrote in a note.

This means that Yahoo will have to pursue a tax-free spinoff of its Alibaba stake. From more than a year, a prominent activist investor, the hedge fund Starboard Value, has been trying to push Yahoo to take action to raise its stock price.

And as for Yahoo’s stake in Yahoo Japan (YAHOY), Alibaba also views it as unattractive, Wong’s reports.

Yahoo’s shareholders could end up paying roughly $12bn in taxes if the Internal Revenue Service deems the Alibaba transaction to be taxable after the spinoff. Also, the company issued a light guidance once again; for its fourth quarter of fiscal 2015 (4QFY15), the management expects revenue to fall within a $1.16-1.20 billion range, well below the consensus estimate of $1.33 billion.