Yahoo, Alibaba Working on New, Taxable Deal
Yahoo Inc. has been working on a new deal to sell a portion of its stake in Alibaba Group Holding Ltd. back to the Asian company, and a transaction could be completed within weeks, people familiar with the matter said.
Context & Ripple Effects
The story closes a loop opened last December, when Yahoo first said it would consider selling its Asian assets after years of tension over its roughly 40%-era Alibaba holding. Since then the company has been shrinking around that decision — CEO Scott Thompson's April plan to cut 50 properties made monetizing the Asian stakes the centerpiece of the refocus.
What changed this week is the shape of the exit: rather than waiting for a tax-advantaged structure, Yahoo and Alibaba are negotiating a taxable sale of part of the stake, potentially within weeks. The pickup across Reuters, Business Insider, and Techonomy shows how closely the market is watching, since the proceeds and the tax bill both land on Yahoo's turnaround math. Note that the deal itself remains unconfirmed — sourced reporting, not an announcement.
First-order effects
- Yahoo would convert a paper holding into cash immediately, but as a taxable transaction it books a tax liability on the gain, reducing net proceeds relative to any future structured alternative.
- Alibaba regains direct ownership of shares held by Yahoo since 2005, cleaning up its cap table ahead of whatever financing or listing path it pursues next.
Second-order effects
- A taxable structure signals Yahoo prioritized speed and certainty over tax efficiency — which raises the bar for what Thompson's team must show for the cash, given the simultaneous 50-property cost cuts and the unresolved patent fight with Facebook.
- Any remaining Yahoo-Alibaba entanglement after a partial sale keeps valuation questions about the unsold portion alive, pricing pressure that follows Yahoo into every subsequent negotiation.
Third-order effects
- If the pattern holds, US portal-era companies exit large strategic Asian holdings in tranches rather than all at once, with each tranche trading tax cost against execution risk.
- Deal structure — taxable sale versus spinoff-style separation — becomes the central design variable for cross-border stake unwinds, something tax authorities and boards will litigate for years.
The trend: Yahoo's Alibaba unwind marks the shift from holding minority Asian stakes indefinitely toward staged, structure-driven exits where the tax treatment dictates timing.