Yahoo scraps Alibaba spinoff plan, will spin off core assets including stake in Yahoo Japan; Max Levchin resigns from board
Yahoo to Spin Off Its Core Businesses — SAN FRANCISCO — Yahoo said on Wednesday that it had dropped a plan to spin off its $31 billion stake in Alibaba, the Chinese e-commerce company.
Context & Ripple Effects
Yahoo's year-long effort to shed its 15% Alibaba stake began in January with a plan for an independent holding company — later filed as Aabaco Holdings — with the Small Business unit carved out separately to keep the split tax-free. By May, potential changes to the IRS's spinoff rules had complicated that exit path.
The reversal comes one week after Starboard's pressure pushed the board into a three-day meeting on the company's future. Instead of spinning off the $31 billion Alibaba stake, Yahoo will now spin off the core operating business — including its Yahoo Japan stake — effectively inverting the January structure.
First-order effects
- Yahoo keeps the Alibaba stake on its own books, while shareholders receive a new entity holding the core business and the Yahoo Japan stake rather than the Chinese e-commerce shares.
- Max Levchin exits the board at the moment the company's structural direction flips, thinning the board as it executes a second restructuring plan in twelve months.
Second-order effects
- Starboard's campaign to force a sale of the core business gets a cleaner target: a spun-off core entity without the Alibaba overhang is easier to price and acquire.
- The Aabaco machinery — the holding-company filings and the Small Business carve-out built for the earlier tax-free split — is repurposed or shelved, stranding months of legal and structuring work.
Third-order effects
- If IRS rule changes keep making tax-free spinoffs unreliable, boards under activist pressure may increasingly choose outright breakup or asset sales over spin structures — with the acquirer, not the shareholder spinoff, as the end state.
- The pattern points to legacy web companies being valued asset-by-asset until activists force the sum-of-the-parts apart, a structural unwind of the old portal-era conglomerate.
The trend: Activist pressure plus tax-rule risk are pushing legacy internet holding companies from spinoff-based value unlocks toward direct breakup and sale of their operating cores.