Yahoo’s Yin and YANG
Blog Date: 11/21/11
Jerry Yang, Yahoo!’s co-founder and board director, is raising red flags. Some of Yahoo!’s top shareholders and other activist shareholders, such as Third Point LLC and P. Schoenfeld Asset Management LP, are concerned with Yang and his recent role in the possible sale of Yahoo!. Yang has discussed creating a new ownership group using his 3.6% stake in the company. The Wall Street Journal reported that Mr. Yang and other Yahoo! bankers have discussed the possibility of creating an ownership group which would collectively own about 10% of Yahoo!’s shares. With a buyer who would take another 20% stake, the company could essentially buy back its stocks, increasing the size of that stake. This basic explanation of Yang’s possible plan is called “leveraged recapitalization.”
These concerns of the shareholders are just the most recent indecent regarding Yahoo!’s corporate situation since the firing of CEO Carl Bartz in September. Since then, the company is still considering whether to sell all or parts of itself. According to the Wall Street Journal, Yahoo! is also currently searching for a new CEO as well as discussing possible solutions to their existing tribulations. However, it ultimately comes down to one question……What is Yahoo!’s next move?
In my opinion, Yahoo! has two options: 1) Sell or 2) carry out Yang’s leveraged recapitalization idea. Yang is currently meeting with several private equity firms discussing which option is in Yahoo!’s best interest, according to people familiar with the matter. Nevertheless, Yahoo!’s fate still remains unclear. It has a huge decision on its hands, and all we can do as spectators is wait in anticipation. Hopefully, we will see some closure in the near future.