Yahoo's shares fell 7.5% in the last 20 minutes of the trading day May 19 after an IRS official said the agency is considering changing its rules regarding spinoffs. The move could impact Yahoo's plans to spin off its stake in Chinese e-commerce giant Alibaba in a way that would avoid billions in taxes.
Yahoo Declines on Potential Changes to IRS’s Spinoff Rules
An official with the IRS' Office of Associate Chief Counsel didn't mention Yahoo by name, but said the IRS wants to know if spinoffs are being used as a tax dodge. Yahoo's 384 million Alibaba shares were valued at $40 billion when CEO Marissa Mayer announced the spinoff plan in Jan. Its shares May 19 fell to the lowest point since Oct. 2014.
Yahoo shares plunge on report IRS considering spin-off rule changes
Yahoo on April 21 released its Q1 2015 results. The company posted earnings of 15 cents per share on $1.04 billion in revenue. Wall Street analysts were expecting earnings of 18 cents per share on $1.06 billion in revenue. Yahoo CEO Marissa Mayer defended the soft quarter by saying the company was in the middle of a "multi-year transformation."
YHOO Analyst Estimates | Yahoo! Inc. Stock - Yahoo! Finance
Though display revenue was down 7% compared to a year ago, to $381 million, Yahoo touted a 33% increase in so-called "Mavens" revenue. This is revenue from mobile, video, native ads, and social (including ads from Tumblr). "Mavens" revenue topped $363 million in the quarter.
In her April 21 call with analysts, Marissa Mayer said that Yahoo has now retained advisors to help it determine how best to handle its stake in Yahoo Japan. Yahoo Japan is a joint venture between Yahoo and Japanese telecom SoftBank. Mayer plans to share more details about Yahoo's plans for Yahoo Japan later this year.
During its Jan. 27 call with analysts, Yahoo revealed that it would spin off its remaining Alibaba stake, worth about $39 billion. The spinoff, which is due to conclude before the end of the year, will help Yahoo avoid paying taxes on the stake. Yahoo invested $1 billion into Alibaba in 2005.
Yahoo sold 140 million shares of Alibaba when the Chinese company went public in Sept. 2014. The sale earned the company about $9.4 billion in pre-tax income, but was then subject to about $3 billion in taxes.
Yahoo on March 12 agreed to an expanded content partnership with Disney that will see the site's editors appear on a "Good Morning America" segment called "Yahoo Your Day." Images from Flickr will also be incorporated into "GMA" weather segments as part of the deal. Yahoo began featuring ABC News on its homepage in 2011.
Yahoo and Disney/ABC Television Group Announce Expanded Relationship
Activist investor group Starboard urged Yahoo in a Sept. 2014 letter to explore a possible merger with AOL, believing the two companies could deliver more shareholder value by combining and then cutting costs than they can on their own.
Starboard Delivers Letter to CEO and Board of Directors of Yahoo! Inc. - MarketWatch