Yahoo! (O:YHOO) announced today that it is suspending the Alibaba (N:BABA) spin off plan that we heard about in January. As a result, the stock is climbing in pre-market trading. Today, we'll take a look at the announcement the company made, why Yahoo! would want to suspend the sin off how the market is reacting to the news and what we can expect to see from YHOO moving forward.
YHOO Suspends Plan To Unload Alibaba Shares
Yahoo! announced today that its Board of Directors has made the decision to suspend work on the plan to spin off the companies stake in Alibaba Group. As a result of the suspension, the company will now look through alternative transaction structures in an attempt to separate holding in Alibaba. The new plan includes maintaining Alibaba holdings. The company's assets and liabilities will be moved to a newly formed company. When this happens, YHOO shareholders will receive stock in the newly formed company based upon how much of YHOO they currently own as is. In a statement, Maynard Webb, Chairman of Yahoo!'s board of directors had the following to say with regard to the new plan...
“We believe that the previously announced spin off would be tax free to Yahoo! and its shareholders... However, in consideration of developments since the original spin off plan was announced and after significant deliberations, we are suspending work on the Aabaco spin off. Among other factors, we were concerned about the market's perception of tax risk, which would have impaired the value of Aabaco stock until resolved. Informed by our intimate familiarity with Yahoo!'s unique circumstances, the Board remains committed to accomplishing the significant business purposes and shareholder benefits that can be realized by separating the Alibaba stake from the rest of Yahoo!. To achieve this, we will now focus our efforts on the reverse spin off plan.”
How Investors Are Reacting To The News
Overall, the news is positive. Ultimately, with the new plan, YHOO is working to relieve the tax burden associated with the spin off on the company and investors alike. As we've seen historically, when good news becomes available with regard to a publicly traded company, we tend to see positive movement in the market as a result. That's exactly what we're seeing from Yahoo! today. Currently (9:22), YHOO is trading at $35.76 per share after a gain of 2.61% so far in pre-market trading.
What We Can Expect To See Moving Forward
Moving forward, I'm expecting to see bullish activity out of YHOO. The reality is that Yahoo! has earned its way to being one of the larger brands in tech. With a string of incredible products, the company continuously generates solid earnings. Now, considering the news from the spin off plans, it's become clear that the company is heavily focused on strategically making moves that will benefit shareholders in the long run. All in all, things seem to be going incredibly well for Yahoo! and it's hard to imagine that we would see substantial declines on the stock any time soon.