YHOO - Yahoo Inc.

[ni-co]

Those BABA shares will be "stuck" inside SpinCo the same way they are stuck inside YHOO.  Any type of value creating transaction that I can think of will trigger the tax liability.  For example, BABA could buy SpinCo, but if it wants to retire the BABA shares held by SpinCo then it would have to take those shares out of SpinCo, and to do so would trigger the tax. 

As a result, if BABA were to purchase SpinCo with an eye towards retiring the shares, the purchase price would include a discount that would reflect the tax liability.  Meaning thst YHOO holders are essentially paying the tax through the reduced purchase price.

I agree with you on all your points ref the tax basis in SpinCo's shares of BABA. You won that argument handily and were correct on all accounts.

Are you two guys sure that BABA will have to pay taxes on the step-up if it wants to retire the SpinCo (now: "Aabaco Holdings") shares? There was a comment below Matt Levine's article on the spin-off that I found very interesting:

An acquisition of SpinCo by Alibaba would create an offshore entity not subject to US taxes on it's China profits. Any elements of SpinCo that Alibaba can actually use, or is currently using, could likewise be moved offshore, thereby exempting a $40 billion Chinese fortune from paying US taxes, on business that it transacted within China.

The driving force behind an Alibaba acquisition of SpinCo, will be the tax consequences to Alibaba. They could use the BABA Cayman Islands trust to issue BABA common shares and swap them for SpinCo shares, sometime in 2016. Only the US-taxable portion of BABA's activities would then be subject to US taxes. Dilution of BABA may not be a serious issue, as there's an appetite for BABA stock.

I'm no specialist on US tax law but this sounds like a reasonable thing YHOO's tax lawyers may have thought about, doesn't it?

[ni-co]

Ok. I'm back into this one – I just couldn't resist. Because of their meh results YHOO ex BABA was for sale @ $4.80… Cash is $7.40, Yahoo Japan is $8.80 per share.

Even if you discount BABA and Japan by 30% (!) you can buy core YHOO for $1.60.
If the spin-off goes through and you discount both by 10% for buying Yahoo … you get paid $7 in cash and receive YHOO core as a gift – "It's about time!"

This is just plain crazy. People must have been squeezed out of their BABA shorts after the YHOO results.

By the way, to reduce my leverage I bought deep in the money puts on BABA instead of shorting it outright.

[thepupil]

I think Yahoo is very attractive here at

70% of pre-tax NAV
92% of post-tax NAV
103% of post-tax Yahoo worth nothing NAV
126% of post-tax Yahoo worth nothing, net cash goes away NAV

Non-BABA components comprise close to 60% of the market cap of Yahoo now. Hopefully BABA will continue to fall and these will become even more meaningful.

[plato1976]

How do you get $7 per share cash?
I see

Cash And Cash Equivalents   1,188,169     (thousands)
Short Term Investments   4,636,152

and they do have debts

Ok. I'm back into this one – I just couldn't resist. Because of their meh results YHOO ex BABA was for sale @ $4.80… Cash is $7.40, Yahoo Japan is $8.80 per share.

Even if you discount BABA and Japan by 30% (!) you can buy core YHOO for $1.60.
If the spin-off goes through and you discount both by 10% for buying Yahoo … you get paid $7 in cash and receive YHOO core as a gift – "It's about time!"

This is just plain crazy. People must have been squeezed out of their BABA shorts after the YHOO results.

By the way, to reduce my leverage I bought deep in the money puts on BABA instead of shorting it outright.

[krazeenyc]

Hmm....

http://www.marketwatch.com/story/yahoo-drops-effort-for-tax-free-spinoff-of-alibaba-stake-2015-09-08?siteid=yhoof2

The funny thing is.... that's not quite what the filing says.

http://www.sec.gov/Archives/edgar/data/1011006/000119312515314494/d35793d8k.htm

Certainly not good news, but the article does not accurately describe what's going on.

[thepupil]

yep, certainly not good, but not a "drop of the plan"

[thepupil]

http://www.bloombergview.com/articles/2015-09-09/yahoo-s-alibaba-spinoff-is-in-tax-limbo

per usual, matt levine with clear, concise and insightful commentary

[fareastwarriors]

Anyone looking at YHOO?