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The Yahoo stock price opened down 1.7% today (Wednesday) at $30.36 after its Alibaba spin-off plan was rejected by the IRS yesterday. Yahoo stock did rebound Wednesday afternoon and was trading near $31.43 at 12:00 p.m.
Yahoo Inc. (Nasdaq: YHOO) had been planning to spin off approximately 384 million shares of Alibaba Group Holding Inc. (NYSE: BABA) stock for roughly $23 billion. Most importantly, the deal was expected to be tax-free.
Regardless, the rejection by the IRS sent shockwaves through Yahoo's shareholders, who sent YHOO stock down 4% in after-hours trading Tuesday.
The Alibaba spin-off was designed to return cash to Yahoo shareholders. This was just another headache for Yahoo regarding Alibaba. When company officials first announced the spin-off, the Alibaba stake was worth roughly $40 billion. Now the value is down to about $23 billion.
Yahoo company officials reiterated yesterday that they will continue to pursue the Alibaba spin-off.
The Yahoo stock price climbed 25.6% in 2014, largely because of the company's large stake in Alibaba. But it's been a different story in 2015. Since January, YHOO shares have dropped 37.7%. In the last month alone, it is down 14.2%.
BABA stock has followed a similar trajectory. Alibaba stock is down 38.4% in 2015 as investors worry about slowing economic growth in China.
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