Dan Loeb Made His Money and Has Cashed Out a Huge Block of Yahoo’s Stock — As Director, Too
Yahoo said that it planned to buy back 40 million shares of stock from hedge fund investor Dan Loeb of Third Point, and that he and two other board members affiliated with him would step down as directors.
Besides Loeb, that includes Michael Wolf and Harry Wilson. They are required to leave the board once his shares fell under two percent, under the settlement agreement Loeb signed when he joined the board in early 2012. The departure actually takes place in 10 days, and will leave the Yahoo board with seven members.
Yahoo co-founder David Filo, who is still working at the company, is still its largest shareholder.
It’s not clear what prompted the Loeb move, and sources said there was no obvious acrimony over his stepping down, and that it is simply the case of a money man taking his winnings and moving on.
But Loeb once professed to wanting to be the longer-term steward of Yahoo’s turnaround, and had spent a lot of time currying favor with Silicon Valley elite as he moved onto the board of the Internet giant.
That has not happened yet at the company on a fundamental business basis. Despite all of Mayer’s successful moves to juice Yahoo’s rep as a cool place to work, it recently reporting a decline in revenue, and management has to address some worrisome issues, especially weakness in its key display advertising business.
In leaving just as the hard part starts, Loeb still took a deserved financial victory lap, mostly related to the company’s massive stock increase, and then it’s apparently back to just making money via shareholder activism.
“Since our Board’s rigorous search led us to hire Marissa Mayer as CEO, Yahoo’s stock price has nearly doubled, delivering significant value for shareholders,” Loeb said in a statement.
There’s no question about that, with shares appreciating hugely since Loeb began his fight to oust past management and install former Google exec Marissa Mayer as CEO. Loeb started buying Yahoo stock when it was $11 a share.
Loeb is now selling about 3.7 percent of Yahoo back to the company at $29.11 a share, and reducing his stake in the company to 20 million shares. The transaction has caused Yahoo’s stock to decline more than four percent in premarket trading, although limiting the number of outstanding shares should prompt a rise.
The company’s morale has definitely improved, due to a number of clever and PR-friendly initiatives, and Mayer has bought a clutch of promising mobile startups to try to turn around the company’s lackluster product efforts.
But revenues at Yahoo — in contrast to gains by every other Internet giant — actually declined in the current quarter, and it is money from the sale of Yahoo’s assets in China that has been a key factor in the shares rising.
In fact, Yahoo’s stock rise is largely related to that sale of shares in the Alibaba Group, a move that was initiated by former management, after being forced by Loeb.
Loeb has been taking profits all along, actively selling stock since he became a board member. For example, he dumped 11 million shares in February. The new Yahoo purchase of stock from him is part of its multibillion-dollar repurchase effort.
Yahoo’s Mayer said in a statement that Loeb helped the company.
“Daniel Loeb had the vision to see Yahoo for its immense potential — the potential to return to greatness as a company and the potential to deliver significant shareholder value. On behalf of the Board and our entire team, I’d like to take this opportunity to personally thank Dan, Michael, and Harry for the tremendous opportunities they created here at Yahoo!. They have been incredibly supportive as we have built our executive staff and developed our strategy, and they have helped position Yahoo! for future success. While there’s still a lot of work ahead, they’ve given us a great foundation.”
Max Levchin, who has been appointed as a director after an agreement between Third Point and the Board, will remain a director. And Yahoo said it was “committed to revisiting the Board’s size and composition.”
As for Loeb, he is now on to another tech battle. Currently, he is pushing Sony to separate its entertainment unit from the main part of the consumer electronics giant, and it is likely he will double down on those efforts, said sources.