Yahoo will move forward with its plan to spin-off its stake in Alibaba, according to its CEO Marissa Mayer during an interview at the Bloomberg Technology Conference in San Francisco.
Last January, the board of directors of Yahoo announced a tax-free spinoff of the company’s remaining stake in Alibaba into an independent registered investment company (SpinCo). The tech giant plans to distribute Alibaba to Yahoo shareholders as part of the spinoff. The SpinCo will become a separate publicly traded company.
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The U.S. Internal Revenue Service recently announced that it is considering a major policy change regarding spinoffs. The management of Yahoo already requested a private letter ruling on its planned spinoff of its Alibaba stake worth around $33 billion.
David Barosse of Capstone Research suggested the possibility an adverse tax ruling could hit Yahoo. He estimated that an adverse tax ruling related to the spin-off of its stake in Alibaba could affect Yahoo by as much as $11 per share.
New tax rules will not affect Yahoo spin-off of Alibaba stake
During the Bloomberg interview, Mayer said the Yahoo has been reassured that any new tax rules will not affect Yahoo’s planned spinoff.
“We’re proceeding with our plan. The changes don’t apply to previous requests. These proposed changes aren’t changing the applicable law, but just changing the processes. There are many of these transactions. We feel like we should proceed with the transaction as we planned,” said Mayer.
The stock price of Yahoo climbed as much as $41.40 per share following the statement of Mayer. The stock was trading $40.67 per share at the time of this writing, around 3:27 in the afternoon in New York.
Yahoo’s opportunity and strength
Mayer joined Yahoo as CEO three years ago, and she is looking for ways to achieve growth for the company. During the first quarter, Yahoo’s sales excluding revenue shared with partner websites declined 4% to $1.04 billion, lower than the expectations of Wall Street analysts.
During the interview, Mayer pointed out that Yahoo’s Achilles heel (uncertainty whether it is a tech company or media company) has become its opportunity and strength.
“We may not be the biggest tech company, but we get media.We might not be the biggest media company, but we are the biggest that understands technology,” said Mayer.
She discussed the company’s latest partnership with National Football League (NFL) to host the first live webcast of a regular season game in October.The partnership could position Yahoo as a potential destination for exclusive content and videos online.