Yahoo shares got crushed into the close.
The stock fell 7.6% on Tuesday, with most all of this happening in just a few minutes before the 4 p.m. ET market close and appears comments at a D.C. Bar Association event was the culprit.
According to a report from Bloomberg News:
Isaac Zimbalist, senior technician reviewer at the IRS’s Office of Associate Chief Counsel (Corporate), said on Tuesday the government agency is considering changes to rules concerning spinoffs. The IRS will hold in abeyance any ruling requests received starting today as the issue is studied, Zimbalist said at a D.C. Bar Association event.
Ruling requests already received by the IRS will continue to move forward, but that is subject to change.
"The issue comes down to whether we’ve dropped a hot dog stand or a lemonade stand into a business that is primarily publicly traded stocks, cash and other wonderful things that I call appreciated property," Zimbalist said.
The readthrough here is that this could pose an issue for Yahoo as it looks to finalize its spin off of its 15% stake in Chinese e-commerce giant Alibaba. In January, the company announced plans to spin off a 384 million share stake in Alibaba as part of a tax-free spin-off scheduled for completion in the fourth quarter.
In that spin off, Yahoo said it would bundle its stake in Alibaba with its Yahoo Small Business unit, which helps small businesses get websites for small business off the ground and sell things online, according to a report from the San Francisco Gate's Kathleen Pender.
And so the question for Yahoo, it seems, is whether the packaging of these two businesses constitutes, "dropping a hot dog stand or a lemonade stand into a business that is primarily publicly traded stocks" or not.
Yahoo's stake in Alibaba, at current market prices, is valued at around $34 billion; Yahoo's market cap at current market prices is around $38.5 billion.
