Calculator: Trump Tax Cuts Would Jump Yahoo’s Stock By 20 Percent
Thomson Reutuers new Breakingviews calculator shows that President Donald Trump’s promised corporate tax rate could jump Yahoo’s stock value by as much as 20 percent.
Chief Executive Officer of Yahoo Marissa Mayer has been reticent to make a decision about what to do with Yahoo’s $37 billion stake in Chinese e-commerce site Alibaba. Rumors of a huge sell-off of Alibaba stock made waves in 2015, but ended up being just noise, as Yahoo executives decided to keep holdings in Alibaba allegedly to avoid huge corporate tax penalties.
Now that Trump is in office, the potential for major tax reform, specifically corporate tax reform, is a reality. If corporate tax rates were slashed to the 15 percent that President Trump promised on the campaign trail, there is a heightened possibility that more large corporate sell-offs, like Yahoo’s stake in Alibaba, could occur.
Yahoo had originally planned to sell $4.8 billion in internal assets to Verizon, but the deal was delayed Monday to July, as the firm is undergoing a security investigation by a host of government agencies. The firm’s total value, excluding the proposed Verizon sale price and the value of its other stock holdings, is $30 billion.
The combined value of Yahoo’s holdings in Alibaba and Yahoo Japan amount to $45 billion. Under current corporate tax rates, the sale of these assets would be taxed at roughly 39.1 percent, causing nearly half of its value to be lost in taxes. Applying Trump’s 15 percent corporate tax rate, they’d be worth $38 billion. That is a 20 percent increase in Yahoo’s total value, or an $8 billion dollar jump.
Even if Trump and Congress could only negotiate a 22.5 percent corporate tax rate, Yahoo would get a $4.9 billion bump, or over 10 percent.
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