Yahoo shelves plan to spin off Alibaba stake

The company will instead transfer its core business, as well as its stake in Yahoo Japan, to a new company.

Shares from that new company would been be distributed to shareholders pro rata – meaning they’d receive a proportional amount to the shares they previously owned.

During a conference call with analysts and investors on Wednesday morning, Yahoo Chairman Maynard Webb said the board has “complete confidence” in the company’s leadership team. “It’s subject to third-party consent, prepared, audited financial statements, shareholder approval, SEC filings and clearance”, said Webb in a call with shareholders.

Today Yahoo announced a new plan to break apart from Alibaba.

The company now has a market capitalization of $35 billion, and almost all of its valuation stems from its 15% stake in Alibaba and its Yahoo Japan holdings. “A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo’s business”.

In the meantime, the company will tighten its focus in 2016 and prioritize investments to drive profitability and growth, Mayer said. “Outside of Google and Microsoft [Bing] you don’t hear of anyone else”, she said.

Analyst Kay said the revised plan “means Marissa Mayer is not ready to let go of the core Yahoo assets without a fight”. But when the IRS wouldn’t give the company a thumbs up or down on whether it would tax the spin-off, activist investor Starboard Value implored Yahoo to reverse course and spin off or sell its core business instead.

Sunnyvale, California-based Yahoo – which paved the way for consumers to access and navigate the Internet in the 1990s – – has lost ground to younger rivals such as Google and Facebook.

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.

But the tech firm stuck by its intention to separate out its activities under the new structure, a move that could open the door to a sale of Yahoo’s core online operations amid speculation the group may be headed for a break-up.

The move comes after growing concerns that proposed spinoff of the Alibaba stake, which is worth more than $30 billion, could bring about a substantial tax bill. A newly formed entity would inherit ownership of Yahoo’s 384 million Alibaba shares, then worth about $39 billion. The telco giant earlier this year bought Yahoo rival AOL for $4.4 billion, and on Monday Verizon CFO Fran Shammo said the company would look into whether it would make sense to pick up Yahoo as well. He also pledged support for Mayer, with whom investors such as Starboard have expressed frustration.

The latest report followed a three-day meeting of Yahoo’s board of directors last week, which concluded on Friday. As we’ve seen historically, when good news becomes available with regard to a publicly traded company, we tend to see positive movement in the market as a result.