The biggest ever initial public offering (IPO) debut by Chinese e-commerce giant Alibaba in the US market led to profit, Yahoo Inc, which is one of AOL’s shareholder. Shares of Yahoo rose 4.4% to close at $40.60, while AOL jumped 3.7% to $44.55, both on Nasdaq.
Struggling online portal Yahoo, which was an early investor in Alibaba, plans to revamp as it has witnessed shrinkage in its online ad market share in the recent years.
On Friday, activist investor Starboard Value LP said that it has acquired a ‘significant’ stake in Yahoo and urged the company to explore a merger with AOL.
Starboard is the second activist investor that have targeted the internet company in the last three years.
Starboard said the merger could create up to $1 billion in “synergies” by diminishing the overlaps in online display advertising and other overhead costs.
The letter by Starboard to Yahoo chief executive Marissa Mayer, mentioned that the activist investor was looking forward to “engaging directly” with Yahoo to discuss how its plan could be implemented in a timely manner.
In a statement late on Friday, Mayer confirmed that the internet company would review the letter soon. Since her becoming the Yahoo’s CEO in July 2012, Mayer has been involved in buying startups and trendy services like Tumblr to lure a younger demographic and expand Yahoo’s audience on smartphones and tablets as more people follows these handy equipments to connect with digital services.
“I don’t think it will happen but I do think Yahoo is now in play. It puts more pressure on Mayer,” Ironfire Capital founder Eric Jackson said, referring to a potential merger with AOL.
“Between now and four months from now someone will want to submit a short board slate and they will have a strong case,” said Jackson who owns a stake in Yahoo. “Mayer is really under the gun to create value for shareholders and prove she is doing a better job than anyone else can do.”
Yahoo is expected to pocket about $6 billion from selling 140 million of its shares in Alibaba.
This is not the first effort of Starboard. Previously about 2 years ago Starboard bought a stake in AOL, pushed for a patent sale and tried unsuccessfully to gain board seats. It no longer a share holder at AOL.
Representatives from Yahoo and AOL both were not available immediately for comment.
Yahoo (NYSE:YHOO) is currently trading at $40.66. The shares of Yahoo fell by 6% when Alibaba (NYSE:BABA) started trading on Monday. However it bounced back to 4.39% in yesterday’s trading session and gained $1.71.
Yahoo could have made more money had they opted to wait until instead of selling the Alibaba shares for $68 offer price. BABA crossed $90 on the first day. However Yahoo raked in $8.3 billion and seems the same money is going to be used for acquiring AOL.