A swift about-turn has seen Yahoo ditch its plan to spin-off its share in Chinese media giant Alibaba Group.
This decision comes as a surprise following January’s strategy announcement, which would have seen Yahoo’s 15% share – worth $30bn of the internet company’s total $33bn value – placed into a new company.
However, Yahoo chief executive Marissa Mayer has reportedly vowed to stay in charge of the firm, despite speculation that the move might impact her role.
The original spin-off plan was called into question when US tax authorities denied a tax-free request from Yahoo on the deal, which would have led shareholders to spend billions of dollars.
A decision has now been made to put Yahoo’s internet business into a new company that will be listed on the stock market, into which current investors will get shares on a pro rata basis.
Mayer commented that the plan would help accurately value Yahoo’s online business, with more details to be revealed in January as part of the fourth-quarter results.
Despite an initial rise, shares in Yahoo fell 3.1% to $33.76 in afternoon trading in New York.
“We believe that the previously announced spin off would be tax free to Yahoo and its shareholders,” said Yahoo board of directors chairman Maynard Webb.
Webb was concerned that, among other factors, the market’s perception of tax risk would have impaired the value of Aabaco stock until resolved.
“Informed by our intimate familiarity with Yahoo’s unique circumstances, the Board remains committed to accomplishing the significant business purposes and shareholder benefits that can be realized by separating the Alibaba stake from the rest of Yahoo.
“To achieve this, we will now focus our efforts on the reverse spin off plan.”