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.
Analysts and shareholders believe the company and its stake in Alibaba would be worth more separately, as long as the spin-off is not subject to tax incurred from selling the shares.
Following this, Yahoo! filed a request with the IRS in February seeking a ruling to allow it to spin off its stake in Alibaba along with its Small Business Division.
By going ahead with the plan, Yahoo has indicated that they are confident their plan would receive a favourable ruling.
Early in Sept, the Internal Revenue Service refused to promise that the plan for spinning off Alibaba holdings would sidestep U.S. taxes.
The 15% stake is worth almost $23 billion US, as much as Yahoo’s market value, having halved this year as Alibaba’s stock has slumped 45%. This deal was credited to Jerry Yang, a co-founder at Yahoo. Mayer has been telling shareholders for a considerable length of time that Yahoo was dealing with an involved arrangement to turn off its Alibaba stake into another element without bringing about any charges.
The Internet company said in a filing Monday it will move forward with a spinoff despite not having the explicit blessing of tax regulators. Depending on if and how the IRS decides to tax the transaction, Yahoo’s spin-off could end up being an expensive proposition.
Chief Executive Marissa Mayer needs to complete the Alibaba spinoff to quell investors, who are growing impatient with her lack of progress turning around the company’s struggling online-ad business in more than three years at the helm. But for future Yahoo investors post-spinoff, what will make the core Yahoo company appear attractive? Why accept this degree of risk when Yahoo could continue to hold off on this transaction until after it ensures that it will be tax free? Yahoo! can now fully concentrate on pursuing growth.