Yahoo has reeled-in a proposed project that would have seen a spin-off from its stake in Chinese eCommerce colossus Alibaba.
The majority of Yahoo’s £21.8 billion value is accredited to its shareholding in Alibaba, so the idea of a spin-off came as quite a surprise to many, in fact, the decision is the opposite to the strategy that had been declared in January which would have seen Yahoo spin off its 15% stake in Alibaba.
Given the reversal, Yahoo has announced that it will now put its stakes into a new company to be listed on the stock market.
Investors in Yahoo will get shares in the new company on a pro-rata basis.
Yahoo bought 40% of Alibaba in 2005 for £669 million. The current holding is worth in the region of £2.07 billion.
Chief executive Marissa Mayer was recently quoted as saying that the new plan would help ensure that Yahoo’s internet business was “accurately valued”.
She added that she was “taking further steps to tighten our focus and prioritise our investments to drive growth”.
Come January there will be further details released about the move when Yahoo announces its Q4 results.
Three months ago, the plan to spin-off the Alibaba stake hit a stumbling block when US tax authorities refused an application from Yahoo to decide whether the deal would be tax-free.
If the deal had been ruled taxable, Yahoo’s shareholders could have ended up paying out billions of dollars.
Analysts said Wednesday’s announcement could make it easier for Yahoo to sell its internet business. They include websites, mobile apps and advertising services and could be worth between £2.01 billion and £2.35 billion.
Roger Kay, the analyst at Endpoint Technologies Associates, said Yahoo’s internet business still had some value, given its huge global audience and expertise in online advertising.
“I don’t know if Marissa Mayer is the right person to lead to the company out of the desert, but it can be done,” he said. “I think after the spin-off; it will establish its own level of value.”
Yahoo chairman Maynard Webb denied there were plans to sell the internet businesses.
“We believe that we are tremendously undervalued and we think the best path to unlocking that value is by separating the Alibaba assets from our operating businesses and also turning around the performance in our operating business,” he said.
Could Magento web designers have some new work on their hands with Yahoo’s ever-changing plans to make moves online? Only time will tell.