Yahoo reverses its Alibaba spinoff to save on taxes

Yahoo is betting that a reverse spin off will make investors happy... and keep it out of hot water.

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Jon Fingas
December 9th, 2015
Yahoo reverses its Alibaba spinoff to save on taxes

After a week of debating options that included a possible sale, Yahoo has made a decision about its future... and it's probably not what you expected. The web pioneer is conducting a "reverse spin off" where everything but its Alibaba stake is moving to another company. Supposedly, this lets Yahoo go ahead with its original plan to spin off the Alibaba stake (and thus make investors happy) without the risk of a ton of US taxes. It also provides "more transparency" into how much Yahoo is worth, if you ask company chief Marissa Mayer.

That makes it sound as if Yahoo is priming itself for a sale, but the company insists that's not the case. There's higher value in the spinoff and turning around its ailing web business, it says. With that said, it was quick during a phone briefing to emphasize that that it believes Yahoo stock is "undervalued," and that it has a responsibility to "entertain offers." It wouldn't mind a buyer, in other words, but it wants the best possible offer if anything happens.

Whatever the exact intentions, this isn't good news for Mayer. She'd intended the original Alibaba spin off as a quick way to please investors and give her turnaround a chance. The reverse deal suggests that it was never going to be that easy. To make matters worse, this move could take a year or more to go forward -- there's a chance that an uppity investor could derail the whole thing. Yahoo should still be in a better position if the deal goes through, but it's that "if" which has people nervous.

[Image credit: AP Photo/Marcio Jose Sanchez]

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