Icahn attempts to cause headaches, prompting others to join

Today was the official announcement of Yahoo!’s slow march  towards  death. Over the past few months all of Wall Street and  Internet community had to witness the saga of “Will Microsoft raise its bid” or will “Yahoo! accept”. Those concerns were laid to rest about two weeks ago when Microsoft pulled its bid off the table. Of-course most of the investment and strategists stated that was just a tactic and the offer was  there if Yang (Yahoo!’s CEO and Chairman) would return to the table to talk. But upon the announcement revoking the bid, Yang proceeded to high five his co founder and state “They can return to business”.

Thus the onslaught of shareholder investor disappointment and fund managers rage began to surface due to Yang’s inability to maximize share holder value. As this was stated by Gordon Crawford who was “extremely angry” with Jerry Yang for blowing the original Microsoft (MSFT) deal. This has impacts as Gordon Crawford of Capital research has about 16% stake in Yahoo!.

This leads us to the present;it was  a given that someone would get Microsoft back to the table. It was not clear who that someone was. A majority share holder, outsider or even Yang for that matter. It was only with due time would we know who it was. Carl Icahn was the outsider who set his sights on Yahoo, and realized what the gain could be if enough majority share holders agreed to the bid. Causing about 50 million shares being purchased with in the last 1.5 weeks and keep Yahoo! share price above the predicted collapse price of $20.

With Carl Icahn controlling about 4% stake and getting fellow investor John Paulson, head of merger-arb shop Paulson & Co.  who owns 50 million shares to join in. Resulting in a of 8% stake of Yahoo!, along with another 4% that Icahn has been cleared to purchase. Thus having about 12%  between the two, and convincing Carwford to join in would result in about 28% of Yahoo!. Seeing a tread here right? Slowly but surely Icahn sees that he can amass enough people wanting to maximize their return who would agree to remove the current board and allow another board to be placed.

This entire situation of Yahoo! having its board replaced with one willing negotiate with MSFT would result in huge profits for Icahn and maximize shareholder value.  Yahoo! and its board should have  realized long ago that its fight for Independence was doomed the day it released its first quater results. Those results may have warranted a higher bid but not certainly not any signs that this company would any time in the near future maximize share holder value more then the bid would (near future being 12-18months). Thus causing the share holders and even employees to demand negotiations start occurring and creating a sense of urgency to get it all done. But as we all know that’s not how it played out, and now we are finally on the road after the big circling of the wagons to witness the slow march towards merging with Microsoft. This will happen and it will happen due to Shareholders realizing how much Yahoo! fighting for its independence will not maximize anything except loss.

Its a sad fate for a great company, one that excelled in pioneering the way for Internet generation as my self amongst the millions. One can only hope this becomes an example of how not to manage a gem into the ground. Thoughts ? Remarks? Post them I say!

Till another post ~Aditya