Yahoo has abandoned plans to spin-off its $32bn stake in Chinese e-commerce group Alibaba under pressure from investors worried about a potentially huge tax bill and is looking at selling or spinning off its core business instead.

Shares in Yahoo rose more than 2 per cent in after-hours trading in New York after people familiar with the matter said the board had walked away from the spin-off which had been announced in February and was due to take place at the end of this year.

The Silicon Valley company will now consider spinning off its core business together with its stake in Yahoo Japan, a move that poses a much lower tax risk, those briefed on the situation said. Yahoo did not respond to requests for comment. CNBC first reported the news.