The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
HANGZHOU, China– Yahoo! Inc.'s stake in Alibaba Group Holding Ltd. rightly trades at a discount, according to the Chinese e-commerce giant's vice chairman, Joseph Tsai, because selling it would trigger a big U.S. tax bill.
"If there's an easy tax solution, people would have figured it out already,'' said Tsai, speaking at the CNBC Institutional Investor Delivering Alpha Conference Tuesday in New York. "The fact that the Alibaba stake still sits within (Yahoo's) Remain Co., is people haven't figured out how to solve that tax problem. So that asset should trade at a discount because it has this big built-in tax liability.''
As Yahoo is based in Sunnyvale, California, the sale of any assets -- including the Alibaba stake -- would trigger the U.S. federal income tax rate of 35 percent.
Yahoo owns about 15 percent of Alibaba, a stake that has a market valuation of about $37 billion. The internet company agreed to sell its web businesses and real estate to Verizon Communications Inc. in July for $4.8 billion, leaving it with the Alibaba holding and a stake in Yahoo Japan Corp., as well as some intellectual property assets.
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Alibaba is unlikely to buy the remainder of Yahoo that holds those shares “because you still have an asset with a built-in gain with a potential tax liability, trapped in this glass box,’’ Tsai said.
“If we owned the Remain Co. we have to figure out how to break into that glass box to get our shares back,’’ he said. “Those shares remain outstanding, they’re not retired, which restricts our flexibility -- if we want to pay a dividend, if we want to spin off companies from our business -- it’s going to create a lot of problems.’’
The French beauty giant’s two latest deals are part of a wider M&A push by global players to capture a larger slice of the China market, targeting buzzy high-end brands that offer products with distinctive Chinese elements.
Post-Covid spend by US tourists in Europe has surged past 2019 levels. Chinese travellers, by contrast, have largely favoured domestic and regional destinations like Hong Kong, Singapore and Japan.
While travel to Europe remains muted, Chinese shoppers are flocking to Singapore, Thailand and other Southeast Asian destinations where fashion retailers are hoping Lunar New Year marketing investments will pay off.
Local fashion designers experimenting with puffers and other down clothing have scored collaborations with outerwear companies like Moncler and attracted the attention of prominent international retailers like H.Lorenzo.