November 20, 2015
Starboard Expresses Fears Over Proposed Alibaba Deal
The money’s in the Internet in the eyes of a major shareholder of Yahoo.
That’s why Starboard Value LP is urging Yahoo to sell off its display advertising and search components rather than its stake in the Alibaba Group Holdings Ltd. The planned spinoff of roughly $20 billion in shares of the Chinese e-commerce business has been supported by many stakeholders in Yahoo, but Starboard is now saying it has concerns over the move.
A letter was sent to Yahoo Thursday requesting the move, reported Reuters.
In that letter, Starboard’s head, Jeff Smith, stated there is too much risk involved with the Alibaba plan.
“If you stay on the current path, we believe the potential penalty for being wrong is just too great, and the potential reward for being right is not materially better than the other alternative,” Smith stated.
As reported by The Wall Street Journal, it appears Starboard’s change of mind is linked to possible penalties Yahoo may face if the Alibaba departure goes ahead.
The federal government has decided not to rule on whether the proposed transaction would means billions of dollars in taxes. Yahoo’s gambling the IRS will rule in its favour, but stakeholders want a more definitive decision before and idea is set in motion.
Yahoo’s financial struggles have been well documented and the company’s search and display ad business generates the majority of its revenue. Efforts have been made to breathe new life into Yahoo, but those efforts have not resulted in the turnaround many had hoped.
W. Brice McVicar is a staff writer for SiteProNews.