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Yahoo! Inc (YHOO), Alibaba Group Holding Ltd (BABA) And The Stake Spin Off Risk

Yahoo! Inc. (NASDAQ:YHOO) stock had lost more than 1% of its value as it started trading on Wednesday. Yahoo! Inc. (NASDAQ:YHOO) had also dropped more than 15% since beginning of this year. Yahoo! Inc. (NASDAQ:YHOO)’s board is also facing tremendous pressure from the hedge fund Starboard Value Lp managed by Jeff Smith. Here’s what Activist Investor Jeff Smith had said about Yahoo! Inc. (NASDAQ:YHOO) almost a month back. He is pushing Yahoo’s management to spin off its stake in Alibaba Group Holding Ltd (NYSE:BABA). In the current scenario, Yahoo’s stake in Alibaba Group Holding Ltd (NYSE:BABA) is worth around $15 billion. Selling the stake in Alibaba Group Holding Ltd (NYSE:BABA) might push Yahoo’s stock prices up. But is it that simple? FBN’s Jo Ling Kent and NYU Professor of Innovation, Luke Williams talked on Fox Business about the hurdles that Yahoo might face in spinning off its stake in Alibaba Group Holding Ltd (NYSE:BABA).

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Yahoo’s move to spin off its stake in Alibaba might face some regulatory hurdles and might be subjected to tax review. Kent said that Yahoo is planning to go ahead with the move to spin off its stake in Alibaba, despite that fact that IRS is getting interested in the matter as it might affect both Yahoo and Alibaba. She mentioned that Yahoo is very confident about the spin off happening later this year.

Kent said that Yahoo has to just bank on the stake in Alibaba as Yahoo’s stock volatility is a testament to the fact that Yahoo does not have any other fall back options. She pointed out that investors are keeping their hopes high that Yahoo could successfully spin off its Alibaba stake. She also quoted Yahoo’s statement regarding this issue.

“The IRS’s statement is not specific to Yahoo’s planned Q4 2015 spin-off of its remaining stake in Alibaba Group and Yahoo’s small Business, reflects no change in Applicable law, and does not affect previously filed ruling requests,” Kent quoted Yahoo’s statement about the concerns.

Yahoo’s CEO Marissa Mayer is basically an Engineer and in her role as CEO will it be difficult for her to make such strategic decisions? Williams said that in the current economic situation in tech world, Strategy A might not always be the right thing and every company should have additional strategies to adapt to the circumstances. He feels that the main problem is Yahoo’s lack of clarity in its vision ahead.

Williams said that Activist investors are playing a key role in asking tougher questions to the companies, which might never be asked to them otherwise. He feels that in order to come up with answers for those hard questions the companies decide on reorganization of its businesses and management.

Disclosure: None

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