Yahoo sends e-commerce division off with Alibaba stake

When she revealed last week that Yahoo will spin off its nearly $40 billion stake in Chinese e-commerce company Alibaba, Yahoo CEO Marissa Mayer mentioned that a “legacy, ancillary Yahoo business” would go along with it.

Now, we know which one. Yahoo announced on its Tumblr blog Tuesday that Yahoo Small Business will move over to a newly formed public company to be called SpinCo, the same entity that will be home to Yahoo’s 384 million shares of Alibaba. The tax-free transaction hands over the Alibaba riches to Yahoo investors and avoids a tax bill that would have cost some $16 billion.

And what of Yahoo Small Business, a division that is rooted in Yahoo’s $49 million acquisition of Massachusetts e-commerce company Viaweb in 1998? The product helps small businesses sell their wares online.

“Our Yahoo Small Business employees will be invited to join the new company,” wrote Amer Akhtar, who has been leading the small business division since November.

Yahoo declined to comment on how many employees would be affected by the shift, which won’t happen until after the 1-year anniversary of Alibaba’s IPO in September.

P.S.: Don’t remember Viaweb? Here’s a screenshot that its co-founder Paul Graham, now with YCombinator, took shortly before the Yahoo acquisition in 1998.

Above: Yahoo is bidding farewell to its e-commerce Yahoo Small Business branch, but its company store still sells piggy banks, such as this one shown atop a Mercury News conference table.


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  • Royal

    I’m aghast as both a shareholder and customer.

    As a shareholder, SpinCo is supposed to be a pure play vehicle for BABA stock. Why in the world would anyone want to burden it with an operating goal?

    As a customer, I have about a half dozen websites & business mail with Yahoo Small Business… I’ve stayed with them over all of these years because I trust the large company Yahoo… I will DEFINITELY have less trust in a non-Yahoo company, especially one that isn’t even supposed to have an operating mission!

    Please, Yahoo… DON’T DO THIS!

    • JakiChan

      As a shareholder you seem to not understand how this works. In order to spin out the Alibaba stock and not pay taxes the spun out company has to have an operating concern. Otherwise the $16 BILLION in taxes have to be paid. Are you saying that, as a stockholder, you want the company to pay the $16 BILLION in taxes?

      • Sean

        As an American, I want the 16b in taxes to be paid. It’s these kinds of terrible loopholes that have us in the state we are in.

        • JakiChan

          I’m not going to address the tax loopholes. I’m just addressing the fact that in order to do this tax-free spinoff, which is what the majority of shareholders have been screaming for, something had to be spun off.

      • Royal

        JakiChan, you are correct… I read several reports and they did not mention the operating requirement… I was of the belief that it was more of a holding company strategy and I couldn’t believe they would want to burden it with an operating business. I since read in the WSJ that an operating business is, in fact, a requirement… so I came back to correct my comment.

        From a customer point-of-view I still have issues — I liked my service being under the Y! umbrella. But clearly Y! management is on top of this from an investors’ pov.

        Thank you, JakiChan, for pointing my error out right away to minimize any confusion I might have caused for anyone!

        As far as SEAN and ROSEANN DUCHON’s comments are concerned, never fear, taxes WILL BE PAID when you and I sell our shares in this new entity… what Yahoo is doing is avoiding DOUBLE TAXATION (Y! paying taxes, then you & I paying taxes a second time on the same gain when we sell). I hope we can all agree that double taxation isn’t fair, either. I realize this must be confusing, the media hasn’t cover that aspect… their headlines have been screaming erroneously, “tax avoidance” instead of “avoiding double taxation.”

        • JakiChan

          As a customer I agree – your concerns are completely valid. I was more addressing the reason for the spinoff.

          I’m not a business expert, but if this “SpinCo” is around on Jan 1 2016 I’ll be surprised. I would imagine there’s some way that the YSB part will be sold to some private equity firm, or bought outright by Alibaba and then destroyed. If I worked there I would want a hefty set of handcuffs to stick around…

          • Royal

            Agreed that SpinCo won’t be around for long. Nothing I can do now except hope that YSB doesn’t get destroyed in the process… who knows, it could emerge stronger… in that they are a real business, have a million paying customers or so, and given the fact that the division will be worth a whopping $40-$50-$60 billion, any funding SpinCo might do for YSB wouldn’t even be rounding error.

  • Roseann Duchon

    Another example of corporate tax avoidance accounting schemes that result in disparity between the haves and the have nots