Yahoo Chief Executive Marissa Mayer has been under intense pressure from shareholders to spin off its 15 percent stake in Alibaba, which is worth almost as much as Yahoo itself.
Yahoo will also transfer to Aabaco services for small businesses that it hosts in its Internet cloud.
Earlier this month, IRS has declined Yahoo’s request for a private letter ruling on whether the spin-off of its stake in Alibaba would be considered tax free.
Shares of Yahoo, which have fallen about 45 percent this year, touched a high of $29.23 on the Nasdaq on Tuesday. Although Yahoo is taking this action with a few degree of confidence that the transaction will be tax free, the IRS could still decide to tax this transaction after it is completed. Market analysts said Yahoo will have to depend heavily on its Asian assets for survival.
Yahoo, expects this deal to be completed by December 31 has been trying to revive its advertising business by getting more users to its websites. After the IRS issued its statement about the spinoff’s tax-free status on September 8, the company said it was considering its options in the matter. But concerns grew in recent weeks over whether the IRS would allow the transaction that is scheduled to happen at the end of this year. I argued that Yahoo’s share price would continue to trend lower because of bad management, its valuation being nearly entirely contingent on Alibaba (NYSE:BABA), and lackluster growth in its core business.
The company reaffirmed previously estimated earnings and revenue guidance between $2.85 and $3.30 and revenues in the range of $900 million to $940 million.
Will Yahoo Investors Be Responsible for Alibaba Spinoff Tax Liability?
Both the companies have reported a decline in the share value this year. But once that’s gone, what does Yahoo have left?
Investors had reacted positively at the time as it would enable the company to avoid a tax bill that would have cost billions in the future.