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Yahoo Will Spin Off Alibaba Stake Into A Separate Company

Yahoo Will Spin Off Alibaba Stake Into A Separate Company
[Photo: Jason Alden/Bloomberg/Getty Images]

On Tuesday, Yahoo announced mixed fourth-quarter earnings of $1.18 billion in revenue; analysts expected $1.19 billion. The company, however, beat predicted earnings per share at $0.30, compared to the expected $0.29. The more interesting news was that it would create a new investment company to spin off its stake in Chinese e-commerce giant Alibaba. The new company is being referred to as “SpinCo.”

This was one of the major items investors were waiting to learn today, as Yahoo announces its fourth-quarter earnings. The big question: how Yahoo’s huge investment in Alibaba–a majority of Yahoo’s current valuation–would continue to progress. Yahoo’s roughly 15% stake in Alibaba is worth about $40 billion.

Yahoo CEO Marissa Mayer addressed the new company in a press briefing.

“Throughout my tenure with the company, we have worked tirelessly on a tax-efficient alternative that would maximize the value of our Alibaba investment for our shareholders. A tax-free spin-off accomplishes this and delivers value directly and exclusively to our shareholders,” said Mayer.

via yahoo

Mayer briefly discussed SpinCo on Yahoo’s earning call, calling the spin-off “historic” and reiterating that it would maximize investor’s money. Not much else is known about the new company yet, other than that the transition is set to take place before the fourth quarter of 2015.

Mayer also emphasized Yahoo’s strategy of focusing on and investing in mobile, video, native, and social. It’s a shift Yahoo has adopted in the two and half years since Mayer took over as CEO. The four categories brought in $1.1 billion in revenue over the course of 2014, a number Mayer said was primarily organic growth.

In after-hours trading, Yahoo’s stock was up on the announcements Tuesday, which indicates restless investors are at least somewhat satisfied with the news Mayer and company announced.TH