Yahoo Inc. Being Forced To Not Sell Alibaba Stakes
Star Board Value stated that the company should let go of its core advertising business instead of stakes in Alibaba
It has been an ongoing controversy for more than a year now whether Yahoo! Inc. should keep or sell off its stake in Alibaba Group Holding. Ever since Marissa Mayers has taken the charge of the company as a Chief Executive Officer, the web company has mostly made news of spinning off its stake in the Chinese tech giant’s company. A hedge fund company, Star Board Value, is now urging the internet company to let go of the plan to sell stakes in Alibaba. It says that the company should instead sell its core business and spinning off stakes.
Star Board Value sent a letter to Yahoo a couple of days back where it mentioned the company’s reason to spin off stakes such as to avoid taxes but keep on raising money for the investors. It is believed that the main reason ‘appeared to have evaporated after questions arose over whether the Internal Revenue Service would crack down on such transactions.’ Star Board suggested that it must sell its core business of advertising and explore new opportunities. This will leave Yahoo with good enough stakes in its subsidiary Yahoo Japan and Alibaba.
Star Board only argued this because if the company is still planning on to sell stakes of Alibaba then it would have to deal with a lot of issues in the future. Selling of its core business will be easier if compared with the spinning off the stakes. But if done, Yahoo might have to be fighting for months and years with the Internal Revenue Service (IRS) over tax issues.
The Chief Executive of the investment firm, Jeffrey Smith, wrote in a letter to Yahoo, “If you stay on the current path, we believe the potential penalty for being wrong is just too great, and the potential reward for being right is not materially better than the other alternative”.
The company was reached for a comment on the letter sent by Star Board however it clearly declined to give a response as of yet. This particular move by the investment firm has caused immense distress for Yahoo but Star Board believes that this will prove to be a better turnaround plan that will stick for years to come. Under the current CEO, Yahoo has managed to do well in the market which would further contribute in improving its ‘products and advertising capabilities’.
Now it will be exciting to see as to how Yahoo responds to these arguments made by the investment firm.
