Yahoo will keep Alibaba stake under its name

In January, when Yahoo announced plans to spin off its $31 billion stake in Chinese e-commerce giant Alibaba, there was talk of how it would liberate Yahoo to focus on its core business.

The move, following three days of board deliberations last week, is an explicit rejection of Chief Executive Marissa Mayer’s plan to spin off the Alibaba stake and may cloud her focus on reviving its core business of selling ads on its popular news and sports websites.

Experts say that Yahoo’s plan to shed its Internet business to retain its stake in Alibaba may take CEO Marissa Mayer more than a year to complete.

Chief Executive Officer Lowell McAdam and Chief Financial Officer Fran Shammo, using similar language, both said within the past two days that Verizon would look at a Yahoo deal “if it made sense”, instead of declining to comment.

A Yahoo sale of its Web business might have more symbolic significance than anything else.

Sterne Agee CRT analyst Robert Coolbrith pegs the tax liability of the previously planned Yahoo spin at about $8 per share and the potential tax bill much higher at about $13.3 billion.

“The move was necessitated by uncertainty over the tax implications of the Alibaba spinoff”.

She said the company is readying a new plan to refocus which would be unveiled early next year.

Yahoo’s new structure essentially separates its valuable Alibaba investment from the rest of the company.

That raised the specter of Yahoo being hit with a tax bill of more than $10 billion on an investment now worth about $32 billion.

Yahoo shares rose 1.7 percent to $35.43 at 9:35 a.m.in NY. The best path forward, Webb said, involves “separating the Alibaba assets from our operating businesses and also turning around the performance in our operating business”.

Yahoo and its advisers still believe that the original Alibaba spinoff would be tax-free, Yahoo CFO Ken Goldman said on a call. AT&T and Verizon Communications could be possible buyers for the Internet business if the board decides to put the internet business for sale. (Later on, Yahoo admitted it never found a way to make money off “Community.”) Facebook and even newer players like Snapchat have won over users that Yahoo covets for its messaging apps too.

“I’m not sure anyone wants to see a situation where Yahoo pursues this and in 2018, the IRS writes to the company indicating Yahoo owes taxes on that transaction”, said Scott Kessler, deputy director of global equity research at S&P Capital IQ.

Webb, though, emphasized there are no plans to sell Yahoo’s Internet business.

It certainly appears a defeat for Yahoo’s CEO Marissa Mayer, who has made numerous efforts to prevent stagnation of the business since she came into the job in 2012, through digital media content creation and targeting advertising deals with companies like Google.

“The narrative around Yahoo and our valuation is complicated”, Mayer said Wednesday during an appearance on the financial news channel CNBC. The pieces of the business with less appreciation should get picked for any spinoff, he said.

Yahoo! announced a major plan to sell its core internet business in a major reshuffle of its priorities.

Coolbrith argues that Yahoo should be worth at least $43 per share right now and believes that investors should be applying tax discounts for the Yahoo Japan stake and Core Yahoo instead of the Albibaba stake.