It sounds like a dance move — the reverse spin. But it’s actually a financial engineering maneuver Yahoo is using to make the company more attractive to investors.
Transcript
KELLY MCEVERS, HOST:
The tech giant Yahoo is forming a new company, a company made up of Yahoo. The move, announced this morning, is mainly meant to help Yahoo avoid paying taxes, but the company says it will also spruce up Yahoo’s image. NPR’s Aarti Shahani explains.
AARTI SHAHANI, BYLINE: Yahoo has a 15 percent stake in the Chinese e-commerce giant Alibaba. Yahoo wants to get rid of that stake to give cash to hungry investors and because, arguably, the Alibaba shares are overshadowing the rest of the business, making investors undervalue what Yahoo itself brings to the table – stuff like its search engine, mail, Yahoo! News, Tumblr.
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MARISSA MAYER: A separation of our Alibaba stake will further enhance our ability to attract and incentivize talent to grow both revenue and user engagement.
SHAHANI: CEO Marissa Mayer on a conference call with analysts this morning.
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MAYER: We believe that focusing specifically on a reverse spin will help realize these benefits.
SHAHANI: A reverse spin – sounds like a dance move, but this will take another kind of feat – a feat in financial engineering. At first, Yahoo was trying to spin off Alibaba. Problem is, the Internal Revenue Service would not agree in advance to let them do it tax free. So Yahoo’s board decided they’ll spin off Yahoo – take all its assets, except for those Alibaba shares, and make a new publicly traded company. Another option would have been to just give the shares, worth about $32 billion, to shareholders. But, CEO Mayer explains, then Yahoo and shareholders would both get dinged with a tax bill.
MAYER: So it’d actually result in double taxation.
SHAHANI: Last week, rumors surfaced that Yahoo was in such dire straits, it was going to start selling off the core business, the products we know. Yahoo Chairman Maynard Webb sort of dispelled that.
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MAYNARD WEBB: We have made no determination to sell the company or any part of it.
SHAHANI: The reverse spinoff strategy is experimental – not guaranteed to work. It’ll require third-party consent from Yahoo business partners and regulators. Aarti Shahani, NPR News, Silicon Valley.
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