Yahoo CEO Marissa Mayer said Wednesday the company made a wise decision by looking at other options for Alibaba, now that it's no longer planning to spin it off its stake in the Chinese online retailing giant.
The decision came amid uncertainty over whether the spinoff of the 384-million-share stake would be taxed. The IRS told Yahoo earlier this year it would not rule on whether the company could avoid a tax hit when putting its stake in a separate entity, which it planned to name Aabaco.
"Overall, we did see indication, certainly in the market, around tax uncertainty and the duration of time it might take to get to resolution," Mayer told CNBC's "Squawk on the Street." "Given that, we feel it's prudent at this time to look at alternatives like the reverse spin."
"The board will now evaluate alternative transaction structures to separate the Alibaba stake, focusing specifically on a reverse of the previously announced spin transaction," Yahoo said in a release.
"The investor perception and the overhang became much clearer as we came closer to actually effecting the spin," Maynard Webb, chairman of Yahoo's board of directors, told CNBC. "We felt that the overhang would destroy too much shareholder value."
Yahoo will instead work on a reverse spinoff of its Alibaba stake, a transaction Mayer said will allow the company to preserve its shareholder value. "One of the things that's happening right now is that, because so much of our value is driven by Alibaba, it's hard to correlate some of our business results and business successes," she said.
Webb also dispelled rumors of a possible takeover, saying Yahoo has no plans of selling its core business. "We believe that we are significantly undervalued, and we believe the best way to unlock that value is by continuing to focus on the turnaround of our operating business," he said.
Mayer also said the Alibaba reverse spinoff will allow Yahoo to attract more talent.
Shares of Yahoo were up slightly in midmorning trade.
— CNBC's David Faber contributed to this report.
Disclosure: CNBC has a content-sharing partnership with Yahoo's finance site.