Money Stuff
Yahoo?!?
Yahoo will not be spinning off its Alibaba shares into a separate company. Instead, it will work on spinning itself off into a separate company, leaving the Alibaba shares behind: The Board will now evaluate alternative transaction structures to separate the Alibaba stake, focusing specifically on a reverse of the previously announced spin transaction.
In the reverse spin off, Yahoo’s assets and liabilities other than the Alibaba stake would be transferred to a newly formed company, the stock of which would be distributed pro rata to Yahoo shareholders resulting in two separate publicly-traded companies. Everyone realizes that that’s the same thing, right? Yahoo wanted to separate its actual business from its pile of Alibaba shares without paying taxes on those Alibaba shares. (Presumably, though not definitively, as preparation for one day selling those Alibaba shares back to Alibaba in a tax-efficient way.) It came up with a plan to do that. The Internal Revenue Service didn’t like that plan , because it involved avoiding billions of dollars in taxes, and because it looked sort of chintzy. The market got nervous that the IRS would stop the plan. Yahoo’s directors still "believe that the previously announced spin off would be tax free to Yahoo and its shareholders," but because they were "concerned about the market’s perception of tax risk," they are changing course to another plan. The other plan will avoid the same billions of dollars in taxes, but will look a bit less chintzy. Perhaps the IRS will object to this one too. Probably it will just call it a victory and move on. It will be a victory against chintziness, but not, as far as I can tell, against tax avoidance.
Here is an interesting Victor Fleischer column arguing that "deal flow tends to be cyclical, […]
