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"We
believe the likelihood of a positive tax outcome for the company
could be more likely now," Mizuho Securities analysts wrote in a
note. "In our opinion, the IRS is maintaining the status quo on
this issue, and with no changes to guidance on this matter, we
believe that Yahoo should be able to complete this transaction
in a tax-free manner."
Mizuho cut its price target on Yahoo's stock to $40 from $43,
based on Alibaba's lower valuation, joining several other
brokerages in doing so.
Yahoo Chief Executive Marissa Mayer has been under intense
pressure from shareholders to spin off its stake in the Chinese
e-commerce giant.
The 15 percent stake is worth nearly $23 billion, as much as
Yahoo's market value, having halved this year as Alibaba's stock
has slumped 45 percent. Yahoo's shares are also down 45 percent.
At a 40 percent rate, tax on the spinoff would be around $9
billion.
"The decision could potentially put shareholders on the hook for
any tax liability should the IRS challenge (Yahoo's)
interpretation of tax treatment in the future. We expect this
would trigger a legal battle," MKM Partners analyst Rob
Sanderson wrote in a note.
"We think this would present an overhang until clarity arrives,"
he said, but added that the uncertainty was fully priced in.
(Reporting by Sayantani Ghosh in Bengaluru; Editing by Kirti
Pandey)
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