Yahoo! Inc. (YHOO)’s Shares Soar Post Alibaba Group Holding Ltd (BABA)’s Shares Tax-Free Spin-Off

The shares of Yahoo! Inc. (NASDAQ:YHOO) soared in excess of 6 percent after the technology company announced tax-free spin-off of its 15 percent stake in the ecommerce company, Alibaba Group Holding Ltd (NYSE:BABA). The tech company holds 15 percent shares of the ecommerce giant and its stake is valued at $40 billion at least.

Yahoo announced that it will spin-off its stake tax-free by forming a new investment company, SpinCo, and the shares of the company would be distributed among Yahoo shareholders on pro-rata basis. Post the spin-off of Alibaba Group Holding Ltd (NYSE:BABA)’s stake, Yahoo! Inc. (NASDAQ:YHOO) will continue its core business operations and would keep its stake in Yahoo Japan.

Marissa Mayer, CEO of Yahoo, announced,

“Today, along with our Board of Directors, I am proud and happy to announce a plan for a tax-free spin-off of our Alibaba holdings. Throughout my tenure with the company, we have worked tirelessly on a tax-efficient alternative that would maximize the value of our Alibaba investment for our shareholders. A tax-free spin off accomplishes this and delivers value directly and exclusively to our shareholders.”

Yahoo! Inc. (YHOO)

This transaction will take place in the fourth quarter 2015 after the end of the one-year lock-up period. With the spin-off of Alibaba Group Holding Ltd (NYSE:BABA)’s stake, Yahoo would have returned up to $50 billion to its shareholders until now.

Apart from the spin-off announcement, Yahoo! Inc. (NASDAQ:YHOO) reported its fourth-quarter 2014 financial results with $1.18 billion in revenues, excluding the fees it pays to partner websites. At the same time, the tech company reported earnings of 30 cents per share. While talking about the quarterly results, Mayer said,

“I’m pleased to report that our performance in Q4 and in 2014 continues to show stability in our core business.”

After facing a continuous pressure from the investors regarding the spin-off of Alibaba Group Holding Ltd (NYSE:BABA), Mayer could finally take a sigh of relief and focus towards the core business of the company.

This article has been written by Prakash Pandey.

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