IAC/InterActiveCorp. (NDAQ: IACI) shares plunged today after the company announced that it had lost $369.9 million during the fourth quarter due to higher taxes, difficulty in its mortgage referral unit and costs associated with the proposed spin offs of its five business segments. The news has disappointed many shareholders, but underscored the need for the planned spin offs to take place in order to unlock value for shareholders and increase the performance of the company’s individual units.

“There is good news and bad news this quarter — the mix of which is another reason why our previously announced plans to reorganize IAC into five independent public companies makes more and more sense,” said CEO Barry Diller. However, some are beginning to question his credibility after losses continue to pile up and shareholder sentiment is quickly turning against him. One analyst went so far as to say that “there’s probably no momentum to maintain Barry Diller in his current role”.

IAC proposed spinning off four of its divisions to create five independent companies back in November of last year. The spin offs would include its HSN home shopping network, Ticketmaster ticketing service, Interval time-share business, and LendingTree mortgage referral unit. All of the remaining assets would be kept under the current IAC business segment. The results today only confirmed, in many eyes, that such drastic actions needed to be taken in order for the companies to compete. A separation would allow for better management incentivization, easier access to capital and improved operating efficiencies.

Unfortunately, there are many barriers that still remain before any splitup can occur. First, the company is involved in ongoing litigation with Liberty Media, who is attempting to clock the breakup unless the deal is structured to give them control of the new companies. Liberty currently holds 30 percent of IAC and 62 percent of its voting power. Liberty claims that Diller, who controls the voting rights of Liberty’s IAC shares through a proxy agreement, is contractually obligated to vote against the spin off that it opposes because its own stake would be further diluted.

IAC is also facing problems with its LendingTree division, which was forced to write down the value of its goodwill and intangible assets by over $475 million amid continuing difficulties in the mortgage markets. Many believe that any sale of this division while the mortgage markets are depressed would result in less-than-adequate premiums; after all, why sell when the segment is trading at a historic low? IAC also wrote down the value of its entertainment unit by over $57 million as the company sold fewer Sally Foster products and coupon books.

In the end, IAC still has many issues to face before it can even consider spinning off its various business segments. In addition to a legal battle, the company must work to improve profitability in its segments in order to lift the potential valuations of these units and show that they can remain a going-concern as independent companies. After all, once a new company’s price-to-earnings ratio is set at its initial offering, it’s a lot harder to increase in the future even with spectacular results. Combined, these factors make IACI a stock worth watching!

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