It’s no secret that Yahoo’s long-planned spinoff of its valuable Alibaba stake comes with the risk of a hefty tax bill, but now an activist investor says the risk is too high and is urging CEO Marissa Mayer to reconsider the sale.
Starboard Value, which previously pushed for the Alibaba (BABA) stake spinoff, sent Yahoo (YHOO) a letter Wednesday arguing that the $20 billion sale would bring too heavy of a tax burden. Instead, Starboard said the company should sell off its struggling Internet business.
The activist pressure comes on the heels of news that the spinoff of Yahoo’s 15% stake in Alibaba would be delayed until January, if not later, as the IRS has declined to rule on whether or not the sale would result in a multibillion dollar tax bill for Yahoo.
“If you stay on the current path, we believe the potential penalty for being wrong is just too great,” Starboard wrote in its letter to Yahoo.
Starboard is advocating that Yahoo hold on to its stakes in Alibaba and Yahoo Japan and instead move forward with an idea the activist investor first floated more than a year ago: Yahoo should find a partner for its shrinking core business in order to lock in as much as $1 billion in cost synergies. Last year, Starboard pushed Yahoo to consider a merger with AOL, but that company later agreed to be sold to Verizon (VZ). Starboard did not present an alternative merger partner in its letter.
Yahoo did not immediately respond to Fortune‘s request for comment on the Starboard letter, which was first reported by The Wall Street Journal.
UPDATE: This post has been updated with a link to Starboard’s letter.