For a few months, Yahoo’s CEO, Marissa Mayer, has felt the pressure of deciding how to monetize her company’s investment in China’s Alibaba company. This is the effect of the Alibaba internet company has cast on Yahoo, when, in September, the firm finalized its impressive IPO.
Now, one of Yahoo’s important shareholder, Starboard, has raised concerns about Mayer’s plan stake in Alibaba and Yahoo Japan. Jeffrey Smith from Starboard Value hedge fund, has been questioning the plans according to which Yahoo might try a bigger business agreement using its ownerships as payment. He suggests the better approach for Yahoo would be to use the holdings by means of the shareholders.
It has been speculated that Yahoo plans to purchase Time Warner’s CNN or Scrips Networks Interactive. Smith says his worry is inflated as in the moths that past since the IPO of Alibaba, Mayer hasn’t revealed any information suggesting of her plans for the Alibaba shares.
What Smith regards as a mistake, and what concerns him is the possibility of Yahoo deciding to use the shares as assets rather than transforming them into money. The scheme would be accomplished by the separation of a small part of the company only to be purchased and reintroduced back into Yahoo. This is what is called a cash rich split-off.
Smith wrote a letter to Yahoo Chief Executive in which he acknowledges his preference for a tax-free spin-off of the shares held previously in Alibaba and Yahoo Japan to the shareholders. Furthermore, he expresses his concerns to Meyer, concerns that are motivated by the CEO’s obvious prefecence for a cash rich split-off which she made clear at an October meeting of Yahoo and its shareholders.
If Smith will have an impact in Yahoo’s decision, we don’t know just yet. But, chances are slim, as Starboard holds 7.7 million shares in the company, which continues less than 1% of Yahoo’s total worth.
Starboard had accomplished previously a shift in direction in companies it had bigger influence. Only last year, Sarboard hedge fund took charge of the board of Darden Restaurants – which owns Olive Garden. After Smith took over the position of chairman of the company, their stock has seen a significant growth.
The satisfied parties, regardless of what Yahoo will decide, are the AOL shareholders, who, most probably, will benefit from a possible takeover.
Image Source: Isys Press