Yahoo announced on Tuesday that it will be spinning off its remaining stake in Chinese ecommerce giant Alibaba.
The move will help the company avoid paying taxes on the profits from its stake in Alibaba, which helped the company reap billions of dollars afters its IPO.
Like people, companies have to pay taxes on profits from investments. However, there are ways to avoid taxes — and this is one of them. The new company, currently called SpinCo, although that name is just a placeholder, will be owned by Yahoo shareholders, who will each receive stock in the business depending on how much Yahoo stock they own.
Shares in Yahoo were trading 7.6% higher in after hours trading. They company’s stock has rise almost 27% in the past 12 months.
Yahoo announced the spinoff together with its fourth-quarter earnings report. It generated 1.18 billion in revenue, just below expectations, while logging earnings per share of $0.30, just above analysts’ estimates.
CEO Marissa Mayer has been under pressure to provide investors with a return from the value that had been accrued thanks to Alibaba’s growth. Yahoo was forced to sell about $10 billion of stock in Alibaba after its IPO, which resulted in around $3 billion in taxes. This time, Yahoo is sidestepping the tax by spinning the assets into a separate business.
Post-spin, $YHOO will have returned $50B to shareholders via it’s @Alibaba stake. (For reference, @Yahoo‘s mkt cap is $47B.)
— Kayla Tausche (@kaylatausche) January 27, 2015
Mayer touted Yahoo’s mobile revenue, noting a 23% increase compared to the previous quarter of 2014. “Our mobile strategy and focus has transformed Yahoo and yielded significant results,” she said in the press release.
On the downside, Yahoo’s core business of display ads continued its descent. Revenue from display adds (excluding traffic acquisition costs) fell 5% compared to the same period in 2013. This comes despite a 17% increase in the number of display ads sold, as price-per-ad continues to plummet, off 20%.
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Read more: http://mashable.com/2015/01/27/yahoo-alibaba-spinoff/
Yahoo is spinning off its stake in Alibaba to avoid taxes
AliBaba, marissa mayer, Yahoo
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