Starboard Sends Letter to Yahoo! Inc. (YHOO) Board Urging Spinoff of Core Business


Today it was revealed that activist Starboard Value has sent a letter to the board of directors at Yahoo! Inc. (NASDAQ:YHOO) urging them to spin off their core business, while also displaying displeasure at the current job that Yahoo! Inc. (NASDAQ:YHOO) CEO Marissa Mayer has been doing. Starboard claims that they have “lost all confidence in management and the board,” and that the company needs to make major changes and focus primarily on its Alibaba holdings.

“We are highly confident that there are interested and credible buyers for Yahoo’s Core Business,” explains the letter. “It is our understanding that even after Yahoo announced its plan to spin-off, instead of sell, the Core Business, several interested parties subsequently reached out to Yahoo’s management and Board expressing interest in buying the Core Business. Yet, unfortunately, according to several credible media reports, Yahoo has thus far ignored this inbound interest. This is highly concerning to us because when recently asked specifically on CNBC, Maynard Webb, Yahoo’s Chairman, stated that if Yahoo received inbound interest from potential strategic or financial buyers the Board would engage with those parties […] This is unacceptable. By making the above statement, while simultaneously ignoring serious interest, you are sending potentially destructive mixed messages.”

The stock is up significantly since the end of September when shares jumped on possible spinoff rumors. Since peaking at the start of December, however, the stock has been trending south. The stock is trading higher by 0.13% or $0.04 hitting $32.24, despite the rather negative news. About 3.38 million shares traded hands. YHOO has declined 25.38% since June 2, 2015 and is downtrending. It has underperformed the S&P500 by 20.69%.

From a total of 25 analysts covering Yahoo! Inc. (NASDAQ:YHOO) stock, 16 rate it a “Buy”, 0 a “Sell”, and 9 a “Hold”. This means that 64% of the ratings are positive. The highest target price is $62 while the lowest target price is $32. The mean of all analyst targets is $42.71 which is 32.48% above today’s ($32.24) stock price. Yahoo! Inc. was the topic of 59 analyst reports since July 22, 2015 according to the firm StockzIntelligence Inc. SunTrust maintained shares on December 10 with a “Buy” rating. Cowen & Co maintained shares with a”Market Perform” rating and a $35 target share price in their report from an October 21. FBR Capital maintained YHOO stock in a recent report from December 9 with a “Outperform” rating. RBC Capital Markets maintained the rating on October 21. RBC Capital Markets has a “Sector Perform” rating and a $42 price target on shares. Finally, Oppenheimer maintained the stock with a “Outperform” rating in a report they issued on an October 21.

The institutional sentiment decreased to 0.8 in Q2 2015. It’s down 0.23, from 1.03 in 2015Q2. The ratio fall, as 113 funds sold all their Yahoo! Inc. shares they owned while 235 reduced their positions. 60 funds bought stakes while 220 increased their total positions. Institutions now own 619.16 million shares which is 2.60% less than the previous share count of 635.68 million in 2015Q2.

Stonehill Capital Management Llc holds 60.89% of its total portfolio in Yahoo! Inc., equating to 5.71 million shares. Zenit Asset Management Ab owns 4.42 million shares representing 22.25% of their total US portfolio. Moreover, Indaba Capital Management L.P. has 21.81% of their total portfolio invested in the company, equating to 2.31 million shares. The United Kingdom-based Davide Leone & Partners Investment Co Llp has a total of 17.99% of their portfolio invested in the stock. Owl Creek Asset Management L.P., a New York-based fund reported 9.97 million shares owned.

Yahoo! Inc. is a technology company