Daniel Loeb — the guy responsible for ousting the former foul-mouthed Yahoo CEO Carol Bartz and also sabotaging potential successor Scott Thompson in favor of current CEO and Google darling Marissa Mayer — is pulling out the majority of his stock in the company, at a profit of $610 million, and stepping down from the board. Loeb and his hedge fund, Third Point, have sold 40 million shares back to Yahoo which doubled in value over two years to $1.2 billion, suggesting Loeb knows something about Yahoo's stock. But while Loeb will keep 20 million shares, the move suggests he thinks their value has peaked.
Yahoo's rising stock price is Mayer's biggest point of success. Since she took over, the stock has made a steady climb or more than 70 percent. The hope from Mayer and the rest of the shareholders is that trajectory would continue as Mayer brought in more revenue — something she hasn't done yet. Loeb's departure, however, suggests some internal fear that might not happen. Analysts have blamed the drop on Loeb's hunch that the stock has reached its high for awhile, reports The Hollywood Reporter.
Anytime a big name investor with some know-how and a bunch of stock pulls out big lump of shares, its cause for concern. Peter Thiel, one of the first and more prominent investors in Facebook, essentially pulled the same move on Facebook, suggesting he had lost faith in the social network's power to make money. Loeb, whose recent sell will decrease his total stake from six to two percent, has the same symbolism.
Indeed, tech-watchers have suggested that the stock price rise might have nothing to do with Mayer, but the company's large stake in Alibaba. The Chinese e-commerce company is expected to go public as soon as later this year, which could change the nature of Yahoo's balance sheet. Though, most analysts are betting that an IPO will only help Yahoo. The come-back tech giant's remaining stake in Alibaba could be worth as much as $18 billion, estimate analysts. That money would theoretically fit into Mayer's plan to invest in the company's products that will make it more money that will continue to boost its stock price.
Loeb thinks not. Perhaps he sees some sort of Facebook level failure in Alibaba's future. Or maybe he sees last year's stock rise as a reflection of Mayer related hype that will soon wear off? There's also the more optimistic take: Loeb just needs some cash right now. Though, quitting the board and pulling out $1.6 billion would be a bit dramatic for that.
For Mayer, there is one bright spot in this shakeup. "The agreement is also a victory because she gets to remove a shareholder agitator from the board," notes the New York Post's Garrett Sloane. She also owes her tenure to Loeb, which is probably why her statement on the matter was so cheery. "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," she said.