Yahooed - as in… You’ve been “Yahooed.” This is what happens to investors when the their stock price gets hammered by someone being greedy. And by “someone” - I mean a group of people.
It could be the Board of Directors who, for whatever reason believe they are acting in the best interest of shareholders. In case you own YHOO right now, you might want to know whom to blame, so here is where you can start - the Yahoo Board of Directors:
- Jerry Yang, CEO, Chief Yahoo and Director
- Roy J. Bostock, Chairman of the Board
- Ronald W. Burkle, Director
- Eric Hippeau, Director
- Vyomesh Joshi, Director
- Arthur H. Kern, Director
- Robert A. Kotick, Director
- Edward R. Kozel, Director
- Mary Agnes Wilderotter, Director
- Gary L. Wilson, Director
Shortly after the MicroHOO deal was proposed in early February, I wrote this post and asked…
I get a kick out of Yang and the Yahoo board. I know they are just trying to negotiate a higher price but consider that maybe Microsoft tells them to forget it. What will the board conclude then is the best interests for stockholders?
So Monday morning, when the market has a chance to “revalue” YHOO, I am looking forward to hearing how the Board was just looking out for shareholders when it tried to play hard to get.
Except for Microsoft’s offer, this stock has gotten hammered by failed optimism and mismanagement over the last several years while Google kicked its ass. On Monday, investors will get to experience that all over again.
Outside the Board of Directors, there are others who have “Yahooed” investors. Chief among them are the big YHOO shareholders like Bill Miller of Legg Mason who owns about 84 million shares of YHOO (approximately 6% of the company) and whose position represents about 4.4% of the Legg Mason Value Trust Fund. When this deal was announced, Bill was quick to opine that MSFT would “need to enhance its offer” and that $31 was just too low to get a deal done for a company that Microsoft needed. According to the great value investor, YHOO was actually worth closer to $40. Just Yahoo “Google” for the commentary of Bill Miller on this deal when it was announced and you’ll have a field day of seeing what it takes to get “Yahooed.” There comes a point where large shareholders overstep their bounds in pursuit of a few more bucks per share to juice their own performance and they run the risk of screwing things up. In my opinion, that happened here. The BOD listens to big shareholders like Bill and since their “hard to get” stance reflects the views of their constituents, you should not forget the impact of large investors when you get “Yahooed”.
Next on the list of groups that “Yahooed” this deal, are the arbs. I enjoyed listening to a few arb interviews this weekend where they whined about how this deal should have been done. “Live by the sword, die by the sword.” I absolutely hate dealing with the impact of arbs on most positions affected by M&A. Sometimes I am on the right side when the deal is announced and other times, it’s not pretty. As I have repeatedly written, I try to get out of the way of any transaction that has the attention of the arbs. So if a few of them have gotten hammered by playing the gap on this deal, I am enjoying it. I have great respect for the arbs and if they got “Yahooed” partly due to their own efforts, I am not broken up about it.
Lastly, I look to the group of speculators who “Yahooed” this deal. There were more than a few people that bought YHOO over the past 3 months (and even last week)betting that a deal would get done at a premium to market prices. Their optimism trying to play the buyout game probably contributed to the bravado of management. Sadly, they “Yahooed” themselves.
To all of you YHOO shareholders that were in this position prior to the Microsoft bid and who held on for a higher bid or a hostile offer, you got “Yahooed” - by the Board and by big shareholders, and by the arbs, and by the speculators and sadly, by your own willingness to hang on.