Yahoo! Inc (YHOO) Surprises Everyone with Its Tactical Spin-Off

Yahoo! Inc. (YHOO)

 Yahoo! Inc (NASDAQ:YHOO) declared on Tuesday, 27th January, 2015 that it would be spinning off its stake in Alibaba Group Holding which is worth $40 billion, to shareholders. What renders this news more interesting is that Yahoo has found a way of going about the deal without having to pay any taxes, thus marking this as one of the greatest coups by CEO Marissa Mayer.

It has been quite some time since shareholders have been clamoring for Yahoo! Inc (NASDAQ:YHOO) to divest its stake in the Chinese online retail giant and this outcome turned out to be the best for all concerned. Amongst other things, this outcome has provided a safety net for CEO Marissa Mayer as also her board members from the ire of shareholders that was expected to surface in the proxy season which is round the corner. One of the shareholders of the company expressed the sentiment in his following comment –

“If they hadn’t announced the spin it would have been a fiasco and Mayer probably would have been fired. Now, Marissa and (CFO) Ken Goldman are on the clock for the next three quarters.”

Yahoo! Inc. (YHOO)

Courtesy of SpinCo, all shares of Alibaba will be distributed amongst Yahoo! Inc (NASDAQ:YHOO)’s shareholders and CEO Mayer explained it as follows –

“We believe it maximizes value for our shareholders and optimizes transaction efficiency and certainty. This is a structure that we can pursue and affect independently, capturing value exclusively for our shareholders.”

Having solved this long-standing issue, now she is likely to have more time to focus on the core business of the company.

CNBC dissected this decision on its show with Robert Peck of SunTrust and he reiterated the market sentiment in general when he said that the spin-off was an efficient way of handling taxes. For a company which has largely remained an underperformer in recent times, he suggested that it should make strategic investments in future. In reaction to the news pertaining to spin-off, shares of Yahoo! Inc (NASDAQ:YHOO) immediately shot up by 7% and were poised at $51.42 when the trading session drew to a close.

This article has been written by Vinita Basu.

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