The Yahoo! Inc. Turmoil Continues

Written by Activist Stocks

Ever since Marissa Mayer took over the reigns of Yahoo (NASDAQ:YHOO) in 2012, trouble has been brewing. At first, her hiring inspired hope that she would turn around the company and lead them further. Unfortunately, that wasn’t/isn’t the case. The staff is losing faith in leadership and the company is in need of a desperate overhaul. However, time is now on Mayer, nor the company’s, side.

Some investors feel that the only way to fix the problem is the firing of Marissa Mayer. She’s now turned her focus to making cuts in the company, where she’s expected to announce more major layoffs by month’s end – and could be upwards of 10% of the staff. This is part of her plan to streamline the company.

Starboard Value increases its pressure on Yahoo! Inc. (YHOO)

This activist hedge fund has been in YHOO for a couple years. It initially pushed for the spin off of Alibaba (NYSE:BABA), but later turned against that idea – now pushing for a sale of the entire company.

In a recent letter sent by Starboard Value, the fund said it’s disappointment with the company and a restructuring of the company. Starboard says it shares the disappointment with other investors that Yahoo is trying to turnaround its business, noting that Yahoo’s core business is failing tremendously only offset by their investment in Alibaba.

Now, the sale that Starboard and others want goes against Yahoo’s plan of spinning off the core business. The issue being, this spinoff will likely be taxable.

Canyon Capital Advisors LLC, a smaller activist, sent yet another letter to Yahoo last week as well. It doesn’t want Yahoo to waste more time or capital on a turnaround and also pushes for a sale of the core business or the entire company. Canyon is singing a similar song as many shareholders in its thesis for owning – pointing to the sum-of-the-parts undervaluing. The fund notes that YHOO has spent some $3 billion on acquisitions and the market is ascribing no value to those. Now – Canyon also takes issue with reports that it’s heard Yahoo is looking to hire more people (despite the planned large layoff) and spend on acquisitions.