Activist hedge fund and key Yahoo! Inc. (Nasdaq: YHOO) shareholder Starboard Value LP has thrown a major snag in the company’s Alibaba spin-off plans.
Starboard is pressuring Yahoo to halt the $20 billion Alibaba spin-off and instead sell its sputtering Internet business.
‘If you stay on the current path, we believe the potential penalty for being wrong is just too great,’ Starboard wrote in a letter sent to Yahoo.
The potential penalty Starboard referred to is a massive tax bill for Yahoo shareholders.
Starboard initially supported Yahoo’s plan to sell its Alibaba Group Holding Ltd. (NYSE: BABA) stake. But that was before the IRS denied Yahoo’s request for a private letter ruling on whether theALIBABA spin-off would be considered tax-free. Going forward without the IRS tax-free status approval raises the risk the agency could challenge the spin-off in a future audit.
It also means shareholders could be responsible for as much as $9 billion in taxes from the Alibaba spin-off.
This post was published at Wall Street Examiner on November 19, 2015.
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