Since the afternoon the Yahoo reverse plan was first reported on CNBC as the newest step under contemplation, the stock has sunk almost 6 percent.
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Investor dissent is mounting in the wake of Yahoo’s announcement last week to shelve a plan to spin off its shares in Alibaba Group Holding Ltd. due to potential tax risks and instead explore a spinoff of its core Internet business. And Canyon Capital Advisors sent a letter to Yahoo’s board on Friday urging the board to find a buyer for Yahoo’s core Internet business. Canyon feels that the company, by saying it will spend a year to evaluate the spinoff of the core business, is wasting too much time while its business erodes.
In the wake of Yahoo’s decision, however, investor dissent is escalating.
Firing Mayer would cost at least $25 million in severance, and she’s now on maternity leave.
“I disagree with this notion that Yahoo can’t be fixed”, said SpringOwl Managing Director Eric Jackson. Jackson’s turnaround plan includes bringing in an operator to replace Mayer as Yahoo’s CEO and chopping the company’s 12,000-person headcount down to just 3,000 people. Jackson uses 99 PowerPoint slides to lay out his case that while everyone has bought into the narrative of Yahoo being a smoldering ruin, it is actually undervalued after being run into the ground by Mayer. SpringOwl also said that Yahoo must “aggressively cut costs” to get the most out of the company, including selling the company’s headquarters and eliminating employee perks like free food and company iPhones.
The meetings Yahoo held last week included a discussion on whether to heed an activist shareholder’s call for Yahoo to sell the websites, mobile applications and ad services that generate most of its revenue and recast itself to a holding company for its holdings in Alibaba, a rapidly growing e-commerce company, and Yahoo Japan.
Meanwhile, what Canyon Capital wants-to sell Yahoo now-stemmed from Yahoo’s supposed failure in preparing a backup plan for the Alibaba spinoff.
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Starboard hasn’t yet issued a public response to Yahoo’s new proposal to spin off the core business and didn’t immediately respond to a request for comment. “Requiring shareholders to continue to wait for definitive action for another year or more – and extending the tenure of senior management” is “simply unacceptable”. Yahoo’s ongoing financial funk has intensified speculation that Mayer might not be Yahoo’s CEO a year from now, although company Chairman Maynard Webb said Wednesday that Yahoo’s board still has faith in her.
