Yahoo is getting ready to spin off its 15% stake in Chinese ecommerce giant Alibaba, which is good news for shareholders, if it can avoid the heavy tax burden. Its stake is worth $40 billion, while Yahoo’s core business is worth only $7 billion-$8 billion, according to Reuters.
Shares of Yahoo rose 7% on the news. Yahoo beat earnings estimates recently, but its revenues came in a bit light. The spotlight is on CEO to handle the sale of the stake adroitly and to use the cash to maximize results for Yahoo, perhaps in ways that will grow its advertising and media businesses. B.Riley and Co analyst Sameet Sinha said, according to Reuters, “It’s not going to be easy from now on. She has to perform now. There’s nothing shielding her.”
Will you offer us a hand? Every gift, regardless of size, fuels our future.
Your critical contribution enables us to maintain our independence from shareholders or wealthy owners, allowing us to keep up reporting without bias. It means we can continue to make Jewish Business News available to everyone.
You can support us for as little as $1 via PayPal at [email protected].
Thank you.
Mayer seemed stymied regarding the huge Alibaba stake for a while because of the enormous 35% tax burden. Bloomberg’s Mark Levine compares the hefty tax burden to a glass box surrounding the Alibaba stake. Starboard, an activist investor that bought a stake in Yahoo, encouraged the spinoff, cutting costs and a possible merger with AOL, recommended transforming the Alibaba stake into an independent registered investment company. The stock of the company will be distributed pro-rata to Yahoo shareholders. However, Levine thinks this would be the perfect opportunity for Alibaba to buy back its stake by purchasing the investment company in a move that would make Yahoo and Alibaba happy, and that leaves Marissa Mayer saying “Look Ma, no Taxes.”
