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QuestionsCategory: Investor PsychologyAltaba delisting
ashz asked 2 years ago

Hi all, I used to own Yahoo shares. Ever since Yahoo the business entity was bought over by Verizon, Verizon paid Yahoo shareholders the money for the Yahoo business. The Yahoo name was also renamed as ALTABA on the US stock exchange since it only contains ALIBABA shares and a whole bunch of cash. So the sole reason for the ALTABA is to hold Alibaba shares and cash. It is not an on going business. There are lots of talks on how the company wants to liquidate and delist and return the cash back to the investors. 
My question as I am not familiar with the US markets. Upon delisting, there should be a buyout offer right? just like in Singapore if a company wants to delist, it needs to buy out from shareholders? 
Are there any tax issues? will I as a Singaporean be taxed on proceeds from delisting? 
Anyone knows or can point me the right direction?
this seems like one of the risks with investing on foreign shares. 

2 Answers
Victor Chng answered 2 years ago

Hi Ashz,
 
I am not familiar with US delisting as I have not experience it before. I will get my colleague Kenny to reply you as he is more into the US market.  

Kenny Quek answered 2 years ago

Hi ashz,
When a company goes into liquidation, they’ll sell off all their assets, pay off their debts, and distribute the profits (if they have any) to you.
In Altaba’s case, as you can see from their liquidation and dissolution plan here:
“The Fund currently estimates that the Fund could make total aggregate liquidating distributions to stockholders, including the pre-dissolution liquidating distribution referred to above, ranging between approximately $39.8 billion and $41.1 billion (approximately $76.62 and $79.22 per Share, respectively), which estimates assume, among other things, an Alibaba Share price realized on sale and, if applicable, an Alibaba Share value at the time of distribution, of $177.00 per Alibaba Share.”
And, no, as a foreigner, you don’t have to pay capital gains tax. You’ll have no issue getting your money back. The question here is how much? That’s the greatest risk investors looking to make a profit from the liquidation will have to deal with.
Hope this answers your question. Let me know if you have any more on your mind, I’ll be happy to help.

ashz replied 2 years ago

Hi, pretty urgent since the dates for the first distribution is this coming Monday!! So hopefully, you can help me out. The first distribution is on Monday (called a pre liquidation dissolution) which is 51 dollars thereabouts. Is this tax free? Any withholding tax? My worry is that it is treated like a Dividend and taxed at 30%. I keep reading the SEC filings but it doesn’t say outright that no withholding tax for foreigners. Also, is it after Monday the shares will be suspended? Shouldn’t there be another document if so?

ashz replied 2 years ago

Hi, pretty urgent since the dates for the first distribution is this coming Monday!! So hopefully, you can help me out. The first distribution is on Monday (called a pre liquidation dissolution) which is 51 dollars thereabouts. Is this tax free? Any withholding tax? My worry is that it is treated like a Dividend and taxed at 30%. I keep reading the SEC filings but it doesn’t say outright that no withholding tax for foreigners. Also, is it after Monday the shares will be suspended? Shouldn’t there be another document if so?

Kenny Quek replied 2 years ago

Hey ashz,

As Singaporeans, we are subjected to 30% withholding tax on dividends paid out by US companies.

ashz replied 2 years ago

Hmm so is a pre liquidation distribution a Dividend? https://news.bloombergtax.com/daily-tax-report/altabas-foreign-shareholders-get-liquidation-consolation-prize

Kenny Quek replied 2 years ago

No. It’s considered a dividend when it’s paid out of earnings, the operation of the business. In this case, it’s a liquidating distribution. Altaba sell the assets, pay off the liabilities, and pay it out to you from the equity of the business.

According to the article you shared:

“That doesn’t happen in the case of a full liquidation because there is no uncertainty about whether Section 301 applies.”

This means that they are sure that you will not be taxed.

So this is purely my opinion. I’ll cut down my position if I’m not confident about it. The market has already priced in approximately the distribution that they can get from the liquidation. I’m happy with the certainty of what I’m getting and I won’t be upset if I make a couple dollars less per share. And I’ll keep some to see how things play out.

I’m just sharing my thoughts. Take some time to think it through before you make a move.

ashz replied 2 years ago

thanks very much!

Kenny Quek replied 2 years ago

You are most welcome :)