Starboard Value Wants Yahoo To Sell Internet Business, Not Alibaba Stake


On Thursday, activist investor Starboard Value urged Yahoo to abandon its plan to spin off its stake in Chinese e-commerce giant Alibaba Group Holding, and its internet business, including search and display ad businesses.

Previously, the investor asking Yahoo to spin-off the Alibaba stake. But, now the hedge fund reversed its decision due to tax concerns.

According to media reports, Yahoo’s board is considering for the tech company, which stock has lost nearly 31% year-to-date. The company’s board includes Co-Founder David Filo, H. Lee Scott Jr., former chief executive of Wal-Mart Stores, and Charles Schwab Chairman Charles R. Schwab. The board is set to discuss about spin off of Yahoo’s 15% stake in Alibaba.

Alibaba might buy back its shares from Yahoo, according to the reports. Yahoo’s holding in Alibaba is currently valued at about $30 billion.

Yahoo Chief Executive Officer (CEO) Marissa Mayer seems to be in a favor of the spin-off of the Alibaba stake. The company’s search and display ad businesses have been struggling, and Mayer’s efforts to improve business did not bring impressive results.

It is still not clear whether the spin-off will be tax-free for Yahoo shareholders. If the U.S. Internal Revenue Service deems the spin-off is taxable, shareholders would be paying about $12 billion in taxes.

Unnamed sources are saying that the board will not make a final decision about a spinoff until receiving more information and clarity on the tax.

Earlier, Yahoo had plans to complete a spinoff by the end of December. In October, the company said that it expects a spinoff to close in January 2016.

Jeff Smith, who leads Starboard, states in a letter to Yahoo that the company can benefit shareholders through buybacks and dividends using current cash holding and the money that will be received from a sale of the company’s business.

Starboard holds a significant amount of shares in Yahoo.