Close on the heels of Yahoo Inc. (NASDAQ:YHOO) plans to sell its stake in Alibaba Group, the Internet pioneer’s stock price has slid to over 3.5%.
To go into details, the stock has already witnessed a 17% decline in the first five months of 2015. The abrupt fall in Yahoo’s share price is attributed to its core business failure to deliver the required traction in earnings in the online ads industry.
It may be recalled that Yahoo filed an appeal to offload 16% of its shares with Alibaba, along with its operating business arm Yahoo Small Business in the fourth quarter of the year. The deal is expected to be a tax-free transaction.
Although Yahoo’s move has raised eyebrows of many in the stock market, still some investment analysts view as a tactical move by Yahoo to safeguard its investment in Alibaba. In order to avoid enormous collateral tax liability, Yahoo may have resorted to spinoff option, felt the market experts. .
It’s a blessing in disguise for investors who are eager to take part in Yahoo’s future growth. They can capitalize on the crumble in Yahoo’s shares and acquire the same.
At the same time, Alibaba’s share nosedived to $81 from a high of $120 inside two months.
Alibaba, an Internet-based company, whose business interests lie in online retail, business-to-business international trade, and data-centric cloud computing services, payment platforms. It is revered as the Amazon of China. Alibaba’s stock created history in 2010 when it outperformed that of Google’s. It is touted to be the 4th most popular site on the Internet.
Despite a fall in the share price, Yahoo Inc. (NASDAQ:YHOO) continues to be one of the most reputed properties online. At the fag end of 2014, Yahoo recorded 627 million unique visits per month on its sites.
Elaborating the effect of the spinoff, an investment analyst predicted that this deal would create an incremental value of $10-$13 per share through tax savings. Further, it could go to the extent of Yahoo being taken over by other companies.