Investor urges Yahoo to drop Alibaba stake spinoff

NEW YORK - Activist investor Starboard Value is pushing Yahoo (YHOO) to abandon the planned spinoff of its valuable stake in Chinese e-commerce company Alibaba (BABA) and sell its Internet search and advertising business instead.

In a letter to the company, New York-based Starboard says that a better deal would be to sell its search and advertising business because executives haven't been able to turn the business around. It's a reverse in thinking by Starboard which previously wanted the company to spin off the Alibaba stake.

"If you stay on the current path, we believe the potential penalty for being wrong is just too great, and the potential reward for being right is not materially better than the other alternative. When compared to a sale of the Core Business, there is minimal reward in relation to the massive potential risk that you could be taking," Starboard wrote.

Yahoo Inc., based in Sunnyvale, California, announced to sell its $30 billion stake in Alibaba Group Holding Ltd. earlier this year. Yahoo did not immediately respond to a request for comment Thursday morning.

Starboard has a nearly 1 percent stake in Yahoo, according to FactSet.