Needham & Company Remains Bullish on Yahoo! (YHOO) After IRS Refused Tax Ruling on Spin-off
Needham & Company reiterated a Buy rating and $55.00 price target on Yahoo! (NASDAQ: YHOO) after the IRS refused to rule ahead of time that YHOO’s proposed spin-off of Aabaco would be tax free.
Analyst Laura Martin commented, "The IRS refused to rule ahead of time that YHOO’s proposed spin-off of Aabaco (384mm Alibaba shares plus a small operating business) would be tax free. YHOO may go forward with the spin anyway and hope the IRS gives them favorable tax treatment after completion, based on a Skadden Arps tax opinion. In our view, the Investment Implications of today’s news imply that investors in YHOO must have a point of view of whether: 1) YHOO goes forward with the spin; and 2) whether the IRS ultimately gives YHOO favorable tax treatment, because the difference between a zero tax rate and a full tax rate on YHOO’s $23B Alibaba stake is about $7B ($7/YHOO share) of value that will accrue either to the US government or to YHOO shareholders."
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Shares of Yahoo! closed at $30.90 yesterday.