Yahoo! Inc. (YHOO), Alibaba Group Holding Ltd (BABA): Spin-Off Plan Dealt A Major Blow

Share This Article
September 10, 2015 12:32pm ETF BASIC NEWS

alibabayahooKyle Anderson:  Yahoo Inc. (NASDAQ:YHOO) has been planning for a $23 billion Alibaba spin-off, but the company was dealt a major blow by the IRS yesterday.

pre-market movers

Yahoo officials had planned to spin off 384 million shares of Alibaba Group Holding Inc. (NYSE:BABA) in what would have been a tax-free transaction.

However, the IRS informed Yahoo executives yesterday (Tuesday) that the deal would be rejected.

While the deal was rejected, the IRS never explicitly said the deal will be taxable, however.

The Alibaba spin-off was designed to return cash to Yahoo shareholders.

Naturally, they have reacted negatively to the rejected spin-off news.

Yahoo stock was down 2.2% yesterday and opened at $30.40 today.

Alibaba stock has dropped 38.7% in 2015, greatly reducing the value of Yahoo’s Alibaba spin-off.

When Yahoo officials first announced the plan for the deal, it would have been worth nearly $40 billion.

Yahoo’s General Counsel Rob Bell said in a filing this week that Yahoo “will continue to carefully consider the company’s options, including proceeding with the spin-off transaction.”

Any taxes placed on the Alibaba spin-off would likely total billions of dollars.

That would greatly reduce the amount of cash returned to shareholders.

In 2014, YHOO stock climbed 25.6%.

The growth was largely fueled by Yahoo’s massive position in Alibaba.

But including Tuesday’s drop, shares of YHOO are now down 38.5% in 2015 thanks to market volatility and worries about Alibaba.

Money MorningBrought To You Courtesy of Kyle Anderson

We’re in the midst of the greatest investing boom in almost 60 years. And rest assured – this boom is not about to end anytime soon. You see, the flattening of the world continues to spawn new markets worth trillions of dollars;new customers that measure in the billions; an insatiable global demand for basic resources that’s growing exponentially; and a technological revolution even in the most distant markets on the planet. And Money Morning is here to help investors profit handsomely on this seismic shift in the global economy. In fact, we believe this is where the only real fortunes will be made in the months and years to come.

9 "MUST OWN" Growth Stocks For 2021

Read Next

Free Investing Ideas Newsletter!

Join over 70,000 investors who get the latest insights and top rated picks from our free investment newsletter.

Most Popular

9 'MUST OWN' Growth Stocks for 2021

Explore More from

Free Investment Newsletter

Join over 70,000 investors who get the latest insights and top rated picks from our free investment newsletter. respects your privacy.

Best ETFs

We've rated and ranked nearly 2,000 ETFs and ETNs using our proprietary SMART Grade system.

View Top Rated ETFs

Best Categories

We've ranked dozens of ETF categories based on relative performance.

Best ETF Categories