Yesterday, global Internet provider Yahoo (YHOO - Analyst Report) scrapped its year-long plan to spin-off its $32 billion stake in the Chinese e-commerce giant Alibaba Group (BABA - Analyst Report). The move came amid shareholder concerns that the transaction will result in a huge tax bill.

Now, the company is evaluating options to spin-off its core Internet business and the Yahoo! Japan stake into a new publicly-traded company. The company’s core business includes advertising, search technology, Yahoo Sports and the Tumblr blogging platform. It has been struggling to gain market share in online and mobile advertising from Alphabet (GOOGL - Analyst Report) and Facebook (FB - Analyst Report).
 
The new spin-off plan could save billions of dollars in taxes, as Yahoo’s core business is valued at lower than the 15% Alibaba stake. While the name of the new company has not been disclosed, the process is expected to take a year or more to complete. Potential buyers of the Yahoo Internet business include Verizon (VZ - Analyst Report), AT&T (T - Analyst Report), Comcast (CMCSA - Analyst Report) and private equity firms that specialize in buying troubled companies (see: all Technology ETFs here).

Following the new spin-off news, shares of YHOO rose 2.8% initially but fell 1.3% at the close on heavy volume of 2.5 times on average. Currently, Yahoo has a Zacks Rank #3 (Hold) with dismal Growth, Value and Momentum Style Scores of F, D and D, respectively. However, the stock falls in a solid industry that has a Zacks Rank in the top 24% at the time of writing.

The news has put the spotlight on spin-off ETFs and tech ETFs with the largest allocation to this web pioneer:  

Spin-Off ETFs

Guggenheim Spin-Off ETF ((CSD - ETF report))

This ETF offers target exposure to the U.S. companies spun off in the past 30 months by tracking the Beacon Spin-off Index. Holding 41 stocks in its basket, the fund has amassed $335.5 million in its asset base while sees moderate volume of around 61,000 shares a day. Expense ratio came in at 0.66%. From a sector look, financials and consumer discretionary take the top two spots with nearly one-fourth share each while healthcare and information technology round off the next two with a double-digit exposure each. The fund has lost 11.7% in the year-to-date timeframe (read: 5 ETFs to Buy and Hold for the Next 5 Years).

Market Vectors Global Spin-Off ETF ((SPUN - ETF report))

This fund debuted in the space six month ago and has accumulated $2.6 million in AUM. It tracks the Horizon Kinetics Global Spin-Off Index, holding 84 spin-off companies that are domiciled and trade in the U.S. or the developed markets of Western Europe and Asia. Consumer discretionary takes the top spot at 26.4% while financials and industrials round off the top three with a double-digit exposure each. The fund charges 55 bps in fees and trades in volume of 3,000 shares per day on average. It has shed nearly 11% so far since inception.

Tech ETFs

Global X Social Media Index ETF (SOCL - ETF report)

This fund offers the only pure play in the global social media space and has amassed $110.7 million in its asset base. It charges 0.65% in annual fees and sees lower trading volumes of roughly 55,000 shares a day. The product tracks the Solactive Social Media Index, holding 31 securities in the basket. Of these firms, Yahoo takes the ninth spot, making up roughly 4.7% of assets. In terms of country exposure, U.S. firms take half of the portfolio, closely followed by China (28%), Russia (9%) and Japan (6%). The fund has gained 10.2% in the year-to-date time frame.

First Trust Dow Jones Internet Index (FDN - ETF report)

This is one of the most popular and liquid ETFs in the broad tech space with AUM of $4.9 billion and average daily volume of about 600,000 shares. The fund follows the Dow Jones Internet Composite Index and charges 54 bps in fees per year. In total, the fund holds a small basket of 41 securities with Yahoo being the tenth firm accounting for 4% share. From a sector look, Internet mobile applications account for 40% share, closely followed by Internet retail (23%). The product has gained nearly 23% so far this year (read: 5 ETF Outperformers with 20% Plus Gains Year to Date).
 
PowerShares Nasdaq Internet Portfolio (PNQI - ETF report)

This fund follows the Nasdaq Internet Index, giving investors exposure to the broad Internet industry. The fund holds about 94 stocks in its basket with AUM of $292.3 million while charging 60 bps in fees per year. It trades in lower volume of more than 24,000 shares a day. Yahoo occupies the eight spot, with a 3.8% allocation. In terms of industrial exposure, Internet software and services makes up for 56% share in the basket, followed by Internet retail (39.1%). PNQI has surged 21% so far this year.