Yahoo will not move forward with its plans to spin off its stake in Chinese e-commerce giant Alibaba and will instead weigh whether to spin out or sell its core internet business, according to CNBC and the New York Times.
The reports, citing anonymous sources, sent Yahoo shares up as much as 2.6% in after-hours trading on Tuesday.
Yahoo will not move forward with its plans to spin off its stake in Chinese e-commerce giant Alibaba and will instead weigh whether to spin out or sell its core internet business, according to CNBC and the New York Times.
The reports, citing anonymous sources, sent Yahoo shares up as much as 2.6% in after-hours trading on Tuesday.
The move represents a major about-face for Yahoo, which has been preparing for months to spin off its 15% stake in Alibaba in a complicated transaction that was expected to close in January.
But investors have become increasingly worried that the transaction might not receive the tax-free treatment that Yahoo hoped for, and could result in a hefty multibillion-dollar tax bill.
Yahoo has recently come under fire from activist shareholder Starboard Value, which had publicly called for it to abandon the Alibaba spinoff and to sell the core business instead.
During the Yahoo board of directors’ end-of-year meetings last week, the directors weighed the various options.
Yahoo has been trying to revitalize its internet business for more than three years under the leadership of CEO Marissa Mayer, who was one of Google’s first employees. But the company’s revenue remains stagnant, and the company has failed to develop popular new services or mobile applications.
Yahoo has also been plagued by a string of executive departures and criticisms that the company lacks an effective strategy.
Still, the company’s collection of online properties, including its finance and sports websites and its email service, are among the most visited websites in the US.
Verizon CEO Lowell McAdam, speaking at the Business Insider IGNITION conference earlier on Tuesday, said that the telecommunications company would consider buying all or parts of Yahoo if it were to be put on the auction block.
CNBC’s David Faber said on the air that Yahoo would also likely seek to include its stake in Yahoo Japan, a joint venture with Softbank, as well as the more than $5 billion in cash on Yahoo’s balance sheet, in a spinoff of its core internet properties. Faber said a decision to spin off the core business has not been made yet, but that the board has decided to explore what would in effect be a reverse spin of Yahoo’s business.
An announcement about the change in plans could come by Wednesday, according to the New York Times.
The value of Yahoo’s core properties remains an open question. Wall Street currently values Yahoo’s core business at less than zero, with all the of the company’s market cap ascribed to its stakes in Alibaba and in Yahoo Japan. But analysts have said Yahoo’s core internet business could be worth anywhere from $2 billion to $6 billion.
There has also been speculation that the Yahoo business, which was one of the first internet businesses, could be broken up and sold to a number companies.
A Yahoo spokesperson declined to comment.
As reported by Business Insider