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Yahoo stock jumped more than 7 percent in the half-hour after chief executive Marissa Mayer announced plans to spin off the tech giant’s remaining stake in Alibaba Group into a separate investment company.
The tax-free spin off will see Yahoo’s 384 million Alibaba shares, which are valued at $40 billion, become part of SpinCo, a publicly traded company whose stock will be distributed to Yahoo shareholders. Yahoo will continue to hold a 35.5 percent interest in Yahoo Japan following the spin off.
By spinning off the shares into a separate company, which includes some legacy, ancillary Yahoo business, Yahoo is able to avoid what would have been as much as $14 billion in taxes had it sold the shares.
“I am proud and happy to announce a plan for a tax-free spin-off of our Alibaba holdings,” Mayer said. “Throughout my tenure with the company, we have worked tirelessly on a tax-efficient alternative that would maximize the value of our Alibaba investment for our shareholders. A tax-free spin off accomplishes this and delivers value directly and exclusively to our shareholders.”
Mayer announced the spin off as part of Yahoo’s fourth quarter and full year earnings report, where the company announced revenue that miss just slightly from Wall Street predictions. Yahoo reported revenue of $1.18 billion after ad commissions, down slightly from $1.2 billion in the same period last year, and adjusted earnings of 30 cents per share. Analysts were expecting fourth quarter revenue after ad commissions of $1.19 billion and adjusted earnings of 29 cents per share.
For the full year, Yahoo reported revenue after ad commissions of $4.6 billion and adjusted earnings of $1.57 per share.
On news of the Alibaba share spin off, Yahoo stock was trading up more than 7 percent to above $51 in after-hours trading on the Nasdaq.