The recent rise of Yahoo! Inc. (NASDAQ:YHOO)’s stock price is not only an effect of the rise of Alibaba Group Holding Ltd (NYSE:BABA)’s share price, it has more to do with the company revealing a tax-efficient method of divesting its interests in other companies, John Jannarone said in a report on CNBC.Yahoo! Inc. (NASDAQ:YHOO) has had more than its fair share of interest especially before the initial public offering of the Alibaba Group at the New York Stock Exchange (NYSE). Investors bought shares of the internet veteran, consequently driving up its price, as a way to gain exposure to the listing of the Chinese electronic commerce giant as Yahoo owned a substantial chunk of the company.
“[…] I think this is more likely, people are giving the company itself credit for the possibility of divesting these stakes that is Alibaba and Yahoo Japan in a tax-efficient way. If the company cannot do that and they have to pay taxes, the difference could be over $10 billion,” the CNBC.com senior writer said.
According to a filing to the United States Securities and Exchange Commission by Alibaba, Yahoo! Inc. (NASDAQ:YHOO) owned 22.5% or about 524 million shares of Alibaba before it debuted at the NYSE.
If Yahoo! Inc. (NASDAQ:YHOO) chooses to divest this whole stake as well as its interest in Yahoo Japan Corp – a partnership it has with Softbank Corp, another large shareholder of Alibaba Group – the company stands to make a massive payday.
However, its stock is also being affected by the potentially massive tax it has to pay after selling these stakes. Jannarone is saying that the possibility of the company cutting this liability is positively affecting the stock. It also looks like more than just conjecture.
“The company in the [earnings]call last week actually hinted that it’s probably coming close to coming up with an idea for how to do this. Its [Chief Financial Officer], Ken Goldman, actually said that he was optimistic that they can pull this off in a tax-efficient way,” Jannarone said.
If the company can do this, there is more upside to Yahoo’s stock, the CNBC.com senior writer added.
Yahoo has agreed to a one-year lock up period for divesting the Alibaba stake. This means Yahoo is required to hold on to its Alibaba shares until September, 2015. However, Jannarone said that a source of him says that the company could possibly put all its interests including the Yahoo Japan and Alibaba stakes in a separate company from its core business and spin off its core business.
This is complicated but can be done and will essentially let the company divest its stakes in other companies earlier.
David E. Shaw’s D.E. Shaw & Co., L.P. reported owning about 16.19 million shares in Yahoo! Inc. (NASDAQ:YHOO) by June 30. The stake at the time the firm reported the shares was valued at about $568.85 million.