SpinCo, the publicly-traded company that Yahoo is creating by spinning off its 15% stake in Alibaba, is probably going to be around for some time—Alibaba executives have absolutely no desire to buy it.
Since the Yahoo spin-off was announced, some bankers and analysts have predicted that Alibaba would eventually buy it up with its own stock, in what could be a tax-free deal for Yahoo shareholders. But Alibaba executives’ comments in recent days cast doubts on those predictions, and raise questions about what will happen, long term, with “SpinCo.”
Executives at the company questioned the wisdom of spending some $40 billion in stock on SpinCo when they can devote the money to something else, according to a person familiar with their thinking. Additionally, large acquisitions like SpinCo, or even all of Yahoo itself, are unlikely, this person said. Yahoo’s plan, announced Jan. 27, allows its own shareholders to take over Yahoo’s Alibaba stake tax-free, but then the stake becomes a publicly-traded entity that essentially trails Alibaba on the stock market.
An Alibaba spokesman said the company had no comment on Yahoo’s spin-off plans, but said the company is always looking for the right investment opportunities.
Oddly, not a single analyst on Alibaba’s lengthy earnings conference call Jan. 29 asked what Alibaba planned to do about SpinCo.
During the call, vice chairman Joseph C. Tsai criticized a damning Chinese government report released this week that spooked investors, driving Alibaba’s shares down. The company believes “the flawed approach taken in the report, and the tactic of releasing a so-called ‘white paper’ specifically targeting us, was so unfair that we felt compelled to take the extraordinary step of preparing a formal complaint” to the government agency involved, Tsai said.