Yahoo to go ahead with Alibaba spinoff without IRS approval
Internet giant plans to pursue spinoff of stake in the Chinese e-commerce giant, which is valued at more than $23 billion.
Yahoo plans to proceed with a spinoff of its stake in Chinese e-commerce giant Alibaba, even if the Internal Revenue Service doesn't grant it tax-free status.
Yahoo said in a regulatory filing Monday that the company's board decided Wednesday to go ahead with Yahoo's plan to spin off its 15 percent stake in Alibaba. Yahoo's decision comes nearly three weeks after the IRS, "in the exercise of its discretion," declined to rule on the tax-free status of the spinoff.
"Neither this ongoing guidance project nor the IRS's decision not to rule with respect to the Aabaco spinoff transaction changes the current law applicable to the proposed spinoff," Yahoo said in a filing, referring to the name of the corporate entity that will hold the shares after the spinoff.
The tax implications have weighed heavily on the minds of investors since the Sunnyvale, California-based company announced in January its plan to spin off its 384 million shares in the Chinese e-commerce giant, a stake that is currently valued at more than $23 billion. The spinoff, which is expected to be completed before the end of the year, is expected to save the company billions of dollars in taxes Yahoo would have to pay if CEO Marissa Mayer chose to simply sell the shares and return the cash to Yahoo investors. IRS approval of Yahoo's application for tax-free status of the spinoff would increase that savings.
Yahoo also said Monday that an IRS official indicated earlier this month "that any future guidance issued as part of the project would not apply retroactively to transactions completed prior to the issuance of such guidance."
Yahoo's plan for its stake in Alibaba, which pulled off the biggest initial public offering ever last year, hit a roadblock in May when the IRS said it was considering rule changes around spinoffs. After the IRS issued its statement about the spinoff's tax-free status on September 8, the company said it was considering its options in the matter.
Yahoo declined to comment beyond what the company said in its filing with the US Securities and Exchange Commission on Monday.
Yahoo shares of were down $1.53, or 5.25 percent, to $27.60, in regular trading. Shares were trading up $1.11 or 4 percent after hours.