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YHOO Flash-Crashes After IRS Fails To Rule On BABA Spin-Off

Submitted by Tyler Durden on 09/08/2015 17:07 -0400

Well this might explain the weakness in BABA over the last couple of days as it appears 'news' of the IRS lack of decision on the tax-free-ness of YHOO's BABA spin-off leaked out. It is decidely unclear how the IRS's decision not to issue a ruling will impact the spin-off but for now YHOO shares have flash-crashed after hours and are now hovering 5-6% lower...

*YAHOO SAYS IT WITHDREW REQUEST FOR RULING ON SEPT 2
*YAHOO SAYS IRS DIDN'T GRANT REQUESTED RULING
*YHOO: COUNSEL SAYS DECISION WOULDN'T AFFECT ABILITY FOR OPINION
*YAHOO SAYS IRS RULING WAS NOT RULING ADVERELY ON REQUEST

As Bloomberg reports,

The Internal Revenue Service declined to issue a ruling on Yahoo! Inc.’s plans to exit a stake in Alibaba Group Holding Ltd. without incurring taxes, the Web company said.

Tax authorities didn’t make a decision on whether the spinoff was taxable, Yahoo said in a regulatory filing on Tuesday.

The IRS “was not ruling adversely on the request,” Yahoo said, adding that it withdrew its request for a ruling. The company will continue to work on the spinoff plan, while conferring with legal advisers, Yahoo said.

It wasn’t clear how the development will affect Yahoo’s plans to conduct a tax-free spinoff of its shares in the Chinese e-commerce giant, a plan the Internet company unveiled in January as it seeks to maximize the return of cash to shareholders. Any obstacle to the spinoff would erode the appeal for shareholders who bought Yahoo betting they essentially would get a tax-free payout when the deal closes.

The spinoff is a critical step for Chief Executive Officer Marissa Mayer after coming under pressure from Starboard Value LP and other investors to return cash to shareholders, find ways to cut taxes and avoid major acquisitions.