Yahoo Plans To Spin Off Its Alibaba Stake

On Friday, Yahoo filed to spin off its stake in Alibaba Group. Yahoo plans on establishing a brand new company, Aabaco Holdings. The new company will be a combination of 15 percent ownership of Alibaba and a small unit Yahoo, which is aimed at small businesses.

Yahoo originally announced plans to spin off its stake in Alibaba back in January, according to USA Today. As for when it will actually take place, it could happened at some point in the fourth quarter.

When Yahoo spins off its Alibaba shares and Aabaco is formed, then Yahoo will give its shareholders a stake of Aabaco. As of now, Aabaco’s stake is worth around $3 billion, which is going by Alibaba’s current market price, according to Business Insider.

Also, Yahoo has a lockup agreement with Alibaba, but that expires in the fourth quarter, which is one of the reasons why the transaction is expected to take place in the fourth quarter, according to Fox Business.

Back in May, Bloombergreleased a report, which caused Yahoo stock to drop. The report mentioned that that IRS was considering making changes to the way it governs tax-free spinoffs. However, at the time, Yahoo said that it was still going to go through with the plan to spin off its Alibaba stake and that a request to do it was already filed.

Initially, Yahoo’s rationale for spinning off its stake in Alibaba was to accomplish two things, with one of them being to minimize taxes on the sale, as well as to maximize its return of capital to its shareholders.

Last year, Alibaba made headlines when they went public, and in December, it was reported that Alibaba was going to have its very first bond sale in the United States. At that time, the goal was to raise around $8 billion in funds, and then Alibaba would use those funds to pay some of its debt. Alibaba’s initial public offering in September was a success, and so was Alibaba’s bond sale. Alibaba’s bond sale did reach its goal of $8 billion back in November.

Alibaba is a huge online marketplace that is based in China. Alibaba is pretty much a middleman, and connects buyers and sellers of various products. Alibaba is extremely popular, and in 2013, the company’s transactions were around $245 billion, which was more than Amazon, as well as eBay. Alibaba doesn’t have warehouses or anything like that, as Alibaba is solely a trading platform — at least for now.

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