Yahoo, once a household name around the Internet, may soon split in two—but not in the way it once planned. The firm is now working to spin off its core businesses into a new company in order to separate itself from its high-value stake in Alibaba.
Yahoo previously planned to spin off its portion of the Chinese e-tailer earlier this year. The company believed this spin-off would be tax-free, but the conditions for that deal have changed unfavorably since then. Yahoo is now halting its original plan and considering a "reverse spin-off," in which all of its non-Alibaba assets and liabilities would be transferred to a newly-created company. According to CEO Marissa Mayer:
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.
If the reverse spin-off takes place, stock in the new publicly-traded company would be distributed to current Yahoo shareholders in proportion to their current holdings. Mayer says this move is meant to "increase value and decrease uncertainty for shareholders," and that a reverse spin-off would "provide more transparency into the value of Yahoo's business." The company warns that the spin-off could take a year or more to complete.
One may be forgiven for wondering what all the fuss is about, as it's not likely that "Yahoo" rings too many bells for anyone under 30 (save Tumblr users). The once-great company saw its heyday in the late 90s, but it never really recovered from the 2000 dot-com implosion despite multiple attempts at restructuring and diversifying its operations.