Some Yahoo investors want to sell Internet business even if it triggers big tax bill

Tue Jan 5, 2016 1:00pm EST
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By Deborah M. Todd and Michael Flaherty

(Reuters) - Several major Yahoo Inc shareholders are so concerned the company's core Internet business could fall in value that they want it sold as soon as possible.

The shareholders said they would prefer that than wait for Yahoo to go through with its plan to seek a tax-free spin-off of the operation, which includes Yahoo's sports and news sites as well as its popular email service.

Reuters reviewed a letter sent to the Yahoo board by one major shareholder and spoke to people with knowledge of the views of others with significant stakes.

The investors argue that it would be better to take an additional tax hit now rather than owning shares in a spin-off that may have lost significant value later. Yahoo's stock has fallen 36 percent over the last year, making investors nervous about the risk of a further big decline.

Some are also concerned that the Internal Revenue Service may challenge the tax-free status, which could leave shareholders with a big tax bill anyway.

The IRS helped to kill off a previous Yahoo plan to spinoff its stake in Chinese ecommerce giant Alibaba Group Holding Ltd by declining to issue a ruling endorsing its tax-free nature. That would have left Yahoo vulnerable to an IRS challenge to the status at a later date.


Marissa Mayer, President and CEO of Yahoo, participates in a panel discussion at the 2015 Fortune Global Forum in San Francisco, California November 3, 2015. REUTERS/Elijah Nouvelage