Yahoo is facing shareholder pressure to pursue other alternatives besides a complex spin-off of its internet operations while chief executive Marissa Mayer struggles to revive the company’s revenue growth.
Advertisement
Yahoo needs to act now and prioritize selling off some assets, the core operations or the whole business, Canyon Capital Advisors, which owns about 10 million shares in the beleaguered company, wrote to the board in a letter dated Friday.
SpringOwl, a roughly $300 million fund managed by activist investor Jason Ader, is pushing Yahoo to cut costs and bring in a strategic partner such as Liberty Media to help deal with tax issues.
Yahoo has warned the spinoff could take more than a year to complete, a time frame that Canyon Capital called “simply unacceptable” after Yahoo spent most of this year preparing to break off its $31 billion stake in China’s Alibaba Group in an attempt to avoid paying taxes on the gains from its initial investment of $1 billion.
But Eric Jackson, a managing director at SpringOwl, believes Yahoo is still fixable. SpringOwl didn’t comment beyond providing a copy of the presentation, which was previously reported by the Wall Street Journal.
Jackson calculated that Yahoo could get about $6 billion if its core businesses were sold.
Another top shareholder who spoke with Reuters who did not want to be named, said that after the company announced the reverse spin plan, the fund wrote a letter to the board saying it should proceed to sell the core business instead.
Getting rid of 9,000 employees along with “free food and other expensive sponsorships” such as parties could save the company at least $2 billion annually, the presentation said. With cost cutting and improvements to profitability, he predicts it could eventually be acquired for more than $24 billion.
“The market already assigns significant negative value to the company’s mature core operating business and assets and, in our view, this delay will inevitably cause further decline in value”, Canyon said in its letter.
The fund does not have a major shareholding in the company, but he has met several of the company’s largest investors to build support for his plan.
Mayer’s total compensation, including cash and stock, increased 69% to $42 million in 2014, according to Yahoo’s proxy statement filed on Wednesday.
If we’ve said it once, we’ve said it too many times, Marissa Mayer is not having a great time running things over at Yahoo (YHOO).
Canyon’s call to sell the business echoes a recent push by activist investor Starboard, which last month urged Yahoo to halt its Alibaba spinoff and find a buyer for the Internet business.
Canyon Capital wasn’t the only investor with something to say about the current state of Yahoo.
Advertisement
Maynard Webb, Yahoo’s chairman, told investors last week that the board hasn’t approved a sale process.
