Starboard To Yahoo: Alibaba Spinoff Carries Too Much Risk

Activist investor Starboard Value LP is suggesting Yahoo not to pursue the spinoff of its stake in the Chinese e-commerce giant Alibaba Group Holding Ltd., The Wall Street Journal reported. 

Citing a recent letter sent by Starboard to Yahoo, the Journal said that Starboard seems to be changing its earlier stance on the matter as it now believes that Yahoo’s spinoff of over $20 billion in Alibaba now carries too much risk. Starboard rather recommends the tech giant to sell its struggling internet business.

“If you stay on the current path, we believe the potential penalty for being wrong is just too great,” Starboard wrote.

While the activist investor continues to believe the separation shouldn’t incur taxes, it no longer feels comfortable with the risk that it will, the letter says. Last month Yahoo said that the spinoff is likely to be completed in January 2016.

With Yahoo already too far ahead in the process, it is unclear if the company would reverse course, the Journal said.

Starboard Value LP (together with its affiliates, "Starboard") is a significant shareholder of Yahoo Inc. It doubled its stake in the tech company as it added 3.55 million Yahoo shares in the three months ended Sept. 30, according to a regulatory filing last Friday, bringing its ownership to 7.1 million, Bloomberg reported.