Kara Swisher

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Exclusive: FTC Asking Questions About Third Point’s Yahoo Stake

An attorney from the Federal Trade Commission has been asking questions regarding Third Point, the New York hedge fund that owns more than six percent of Yahoo and is its largest shareholder, according to sources.

Two people I spoke to — both of whom declined to be identified — in Silicon Valley separately said they had been contacted by a lawyer at the FTC’s Bureau of Competition inquiring about the circumstances of their contact with Third Point manager Dan Loeb (pictured here), specifically around the time that he first began buying large chunks of Yahoo last year as part of an activist shareholder action. Loeb is currently a director on the Yahoo board.

One of those people contacted was told by the FTC attorney that it was related to a “non-public investigation,” although the lawyer did not reveal specifically what the line of inquiry was about.

But another source said that it was related to the Hart-Scott-Rodino Antitrust Improvement Act (HSR Act) and its filing requirements.

The antitrust law, designed to prevent anticompetitive mergers or acquisitions, according to the FTC Web site, “requires companies to report any deal that is valued at more than $66 million to the agencies so they can be reviewed.”

In addition, according to FTC information, “the HSR Act requires that under some circumstances, individuals who acquire voting securities must notify the FTC and Department of Justice and observe a waiting period before completing the acquisition.” The waiting period is typically 30 days, which can be waived by the FTC.

An FTC spokesman declined to comment about any possible inquiries by its staff.

Third Point also declined to comment.

I reached out to a Yahoo spokeswoman, and am also awaiting a comment.

But another source said the Yahoo board was aware of the FTC scrutiny and does not consider it a serious issue.

To be clear, there has been no action by the FTC against Third Point and many such inquiries never lead to a finding that any violation occurred and are a routine part of the agency’s oversight job.

In addition, if a violation did occur, it also might have been technical and inadvertent or due to faulty advice from counsel.

That was the case in a $500,000 fine paid to the FTC by Comcast CEO Brian Roberts last December.

In addition, the FTC then determined that Roberts also got no financial gains from the filing violation and also reported the problem soon after it was discovered.

Previous to that, the FTC has settled with a variety of investors, including hedge funds, over violations of HSR filing requirements.

Neither Third Point nor Loeb has ever been subject to such any such action by the FTC. He is an experienced investor who is well known for his “poison pen” and pugnacious manner.

“The hedge-fund manager competes in triathlons, never, ever drinks from a plastic water bottle and is unsparing at times in his criticism of corporate executives,” a recent article in The Wall Street Journal noted.

Loeb definitely took clear and unflinching aim at Yahoo last September with his $8.7 billion fund, disclosing that he had acquired a more than five percent stake in Yahoo, proceeding to wage a proxy fight to gain board seats.

At the time, he paid about $11 per Yahoo share. It has recently been trading in the $15 to $16 range.

Despite a lot of noisy agitation, Loeb’s big break came only after he uncovered a fake computer science degree on the resume of then CEO Scott Thompson earlier this year. The result: Yahoo’s directors ousted Thompson and settled with Loeb by giving him three board seats.

In addition, a number of Yahoo directors whom he had attacked stepped aside, including then Chairman Roy Bostock, and a nearly new board was put in place.

Yahoo’s shares have rise 17 percent since Loeb became a major investor, although its stock is down for 2012.

Since he joined as a director, the aggressive money manager seems to be calling the shots at the company, despite not being the chairman of the board.

That has included pushing hard for the appointment of a new CEO, former Google exec Marissa Mayer, as well as involving himself in initial talks to settle the patent lawsuit it had filed against Facebook and also in other deals.

After Mayer was appointed, Loeb has since added even more shares, assembling a more than six percent stake in Yahoo that is worth $1.2 billion.

That’s a $150 million paper gain for Loeb so far, said the Journal. That tidy sum, along with his board victory and the well-received appointment of Mayer, has caused the voluble Loeb to make a series of calls to a number of execs in Silicon Valley he has recently gotten to know via incessant and tireless networking to tout his win.

“He’s very proud of himself and really seems to be enjoying being the guy to force change at Yahoo,” said one person Loeb has dialed up recently to chitchat. “It’s his version of humblebrag.”

Humblebrag, indeed. In a second-quarter letter to his investors last week, Loeb was practically doing a victory dance about Yahoo in one section, which you can see below in its entirety:

Third Point’s investment in Yahoo! appreciated 4% during the second quarter. Due to Yahoo!’s concentrated size in our funds, this modest appreciation still made it the biggest winner for the period.

We were pleased to have favorably resolved the proxy contest we commenced in Q1. Following a subsequent kerfuffle involving misstated academic records of its then‐CEO and a now former board member, Yahoo!’s directors determined that it was in the best interests of the Company to invite our nominees Daniel Loeb, Michael Wolf, and Harry Wilson onto the board.

Since we joined the Board in mid‐May, Yahoo! has achieved three significant milestones. First, Yahoo! and Alibaba, the privately held Chinese internet company in which Yahoo! owns a 40% stake, reached an agreement for Alibaba to repurchase about half of that position at an attractive valuation. This agreement provides pricing transparency and a path to liquidity for this key Yahoo! asset, and is expected to close sometime in Q3. Yahoo! has indicated that it will return substantially all of the expected $5B of cash it will receive from this transaction to shareholders. Second, the Company was able to amicably settle a patent lawsuit filed in the first quarter against Facebook, one of its largest partners, resulting in a new, expanded partnership between the two companies.
Lastly, Yahoo recently appointed Marissa Mayer as CEO. Mayer, a Stanford graduate with a B.A. in Symbolic Systems and M.S. in Computer Science, was Google’s 20th employee when she joined the fledging company in 1999. During her 13 years at Google, she oversaw the design of numerous well‐known products and was responsible for its iconic home page design. Mayer is a leading innovator in Silicon Valley whose creative vision made her a critical part of Google’s leadership team. Her appointment was received favorably by employees and the tech community. We were very pleased to have had the opportunity to work with our fellow directors towards this extremely positive outcome and wish Marissa the best.


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There’s a lot of attention and PR around Marissa, but their product lineup just kind of blows.

— Om Malik on Bloomberg TV, talking about Yahoo, the September issue of Vogue Magazine, and our overdependence on Google