Investing.com -- Yahoo! Inc (NASDAQ:YHOO) has officially decided to spin-off its stake in Chinese e-commerce company Alibaba Group Holdings Ltd (NYSE:BABA), the American multinational tech company declared in filings with the Securities and Exchange Commission.
Under the spin-off, which was previously announced in January, Yahoo will distribute all of the outstanding shares of the new company, Abaco Holdings, to its shareholders. Following the divestiture, Yahoo still plans to own 384 million shares of Alibaba or approximately 15% of the company.
At the end of Alibaba's initial public offering last September, the Chinese company attained a market at above $230 billion. The initial public offering initially raised $21.8 billion before it was later increased to $25 billion, making it the richest IPO ever.
Yahoo Inc! announced the initial filing with the SEC after completing Form N-2 under the Investment Company Act of 1940, the company said in a statement. Yahoo expects the spin-off to be completed during the fourth quarter of this year.
Yahoo reportedly decided to spin-off Alibaba to maximize the value of the investment to its shareholders, while avoiding a large tax burden.
In after-hours trading, Yahoo shares gained 1.06% to 40.10 after closing Friday's session up nearly 2%. Yahoo shares are relatively flat since Alibaba's IPO in September. Shares in Alibaba, meanwhile, fell 0.39% in after-hours to 82.98. In Friday's session, Alibaba shares gained roughly 2.5%.