Welcome to purgatory, Yahoo

Yahoo decided to kill its plan to spin out Alibaba shares into their own standalone, publicly traded company.

Instead, it will do the opposite, looking at spinning out its core business, and keeping Alibaba in place.

“In 2016, we will tighten our focus and prioritise investments to drive profitability and long-term growth,” said CEO Marissa Mayer in a statement. “A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo’s business.”

Transparency, sure. But in the end, this is yet another unfortunate chapter in the story of Yahoo.

So why did Yahoo bail on its spin out?

“Among other factors, we were concerned about the market’s perception of tax risk, which would have impaired the value of Aabaco stock until resolved,” said Yahoo board chairman Maynard Webb in a statement on the decision.

Yahoo owns 15% of Alibaba, which is worth ~$32 billion. For some context, Yahoo’s market cap is ~$33 billion. If Yahoo tried to simply sell its Alibaba shares — instead of spin them out in a separate entity — it would take a big tax hit.

Its spin out was supposed to avoid the tax issue, but it was unclear if the IRS would let that happen.

As a result, there was going to be a lingering issue which would be a giant drag on the vale of the spun out company, thus negating the whole point of doing it.

And so Yahoo decided that the risks of waiting on an IRS ruling were too great for the company and its shareholders. As a result, Yahoo completely reversed course.

The company will now spend the next 12 months in purgatory as private equity firms, and other suitors spend time looking closely at Yahoo’s core business, deciding what it’s worth.

“While the company intends to move expeditiously to complete the transaction, it is advised that complex transactions of this kind can take a year or more to conclude,” it said in its statement.

When Marissa Mayer came to Yahoo in 2011, it was supposed to be different. Employees made Obama-like posters that said, “HOPE.” They expected big things.

Marissa Mayer HOPE posterPosters at Yahoo when Mayer arrived

She was supposed to deliver “products” that would turn Yahoo into a genuine player in the technology industry, just like Google, Facebook, Amazon, or even Snapchat.

Mayer failed to deliver new and innovative products.

She failed to understand that Yahoo at its core is a big web media company.

She failed to understand how brand advertising works. She failed to take care of the big clients that would support Yahoo’s business.

For instance, we recently spoke to a person in the industry with lots of money to spend on advertising and this person said they wouldn’t even know who to talk to at Yahoo if they did want to do something with Yahoo.

Now, Yahoo is back to square zero. If you are a top executive in the technology or media industry, would you go work at Yahoo right now? Of course not.

You, like everyone else, have no idea what’s about to happen the company.

NOW WATCH: The biggest security mistakes people make with online banking

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.