40 million shares, not from the market but from Third Point LLC, an active hedge fund that had a stake in Yahoo Inc. This news is not an abrupt decision rather it is the result of a series of on-goings at Yahoo. Daniel Loeb, the man behind the activist fund Third Point LLC is planning to step down from Yahoo’s board. Along with him two others are also taking an exit from the directorship at Yahoo. It is interesting to note that Daniel Loeb was found commenting positive about Yahoo’s future prospects, yet it was unclear as to why the sudden step to sell the shares.
Some may speculate that Yahoo is in trouble, others may claim that it is in the vision of a grand strategy planned out by the new CEO Marissa Mayer. Whatever the case maybe Yahoo is spending from its war-chest of cash at its disposal. The buy back of the 40 million shares at the price of $29.11 each would total around a whopping $1.16 billion. That indicates that Yahoo is prepared to take any measure that it seems vital for the reshaping of the company. When the former CEO, Scott Thompson, was ousted and Marissa brought in to take control of the reigns; the market responded quite favorably towards this decision. The choice of Marissa was also agreed by Daniel Loeb who was on the board at that time.
Left with 2%
However this sudden change in plans has sent the market into a frenzy and Yahoo has witnessed a 4.3% drop in its share price after the announcement during midday trading in Nasdaq. The hedge fund, Third Point, is still left over with around 20 million shares of Yahoo which amount to about roughly a 2% of the company’s stake. However this movement would not be taken lightly. A lot of analysts would observe this move and might exit the market along with Third Point. This is because Third Point’s investment in the first place resulted in a lot of buyers snapping up Yahoo’s shares. It is now speculated that a couple of them might reconsider their holdings and dump the shares.
“Probably a lot of investors are saying ‘We had a pretty good run here, it makes sense to take some off the table. Much like a lot of investors followed Third Point in, a lot will follow Third Point out.” Josey, JMP Securities analyst, said.
Resignations are in order
The resignations of directors Loeb, Harry J. Wilson, and Michael J. Wolf were part of Yahoo’s settlement with Third Point in May 2012, Yahoo said.
“Daniel Loeb had the vision to see Yahoo for its immense potential – the potential to return to greatness as a company and the potential to deliver significant shareholder value,” Yahoo CEO Marissa Mayer said.
“Harry, Michael and I are pleased to have played key roles in Yahoo’s resurgence since we joined the Board last spring. Since our board’s rigorous search led us to hire Marissa Mayer as CEO, Yahoo’s stock price has nearly doubled, delivering significant value for shareholders, “Loeb said in the statement.
After this transaction has been completed Yahoo will be left over with about $700 million from the $5 billion repurchase authorization package that it announced last year. Looks like Yahoo has spent quite a handsome amount shopping and is seeing its reserve dwindling. The board resignations will be effective from July 31.