Yahoo Inc said it shelved a plan to spin off its stake in Alibaba Group Holding Ltd, citing tax concerns, and instead will create a company to hold all of its assets excluding its stake in the Chinese e-commerce giant.
The new publicly listed company will house Yahoo’s Internet business and its 35 percent stake in Yahoo Japan, Yahoo said on Wednesday.
The stock of the new company will be distributed pro-rata to Yahoo shareholders.
Shares of Yahoo, which will remain publicly traded, were up 2.4 percent at $35.67 before the opening bell.
“A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo’s business,” Chief Executive Marissa Mayer said in a statement.
Yahoo, which has a market capitalization of about $35 billion, owes most of its valuation to its stakes in Alibaba and Yahoo Japan.
The Alibaba stake alone is worth more than $30 billion.
Yahoo’s plan to spin off its stake in Alibaba hit a hurdle in September when the U.S. Internal Revenue Service denied the company’s request for a private letter ruling on whether the transaction would be tax-free.
Yahoo shareholders could have ended up paying billions in taxes if the IRS had determined that a spin-off was taxable.
Activist investor Starboard Value LP asked the company in November to drop its plans and sell its core search and display ad businesses instead. Starboard had previously supported the spinoff.