Starboard Value LP, the activist investor of Yahoo Inc. sharpened its rhetoric towards the firm when it expressed some concerns it has regarding the potential next moves it may be making as per the rumors. The investor was referring to the reports circulating in the media that indicate Yahoo has an interest in purchasing cable entities. The activist is also focused on rumors that the company was thinking of shedding the shares it holds in Alibaba Group Holding Ltd. for the purpose of saving taxes. This is an old maneuver called the cash-rich split-off, which could be a wrong choice for the company in Starboard’s opinion.
Jeffrey Smith, the founder of Starboard wrote a letter to Marissa Mayer, the chief executive of Yahoo in which he said that such actions would be an indication that there need to be some major leadership changes in the company. This is a threat that wasn’t made in the past by the investor. No comment was made by a spokeswoman of the company in response to the letter. The chief executive has said that she will discuss her plans about the remaining Asian assets either before or after 27th Jan, when the fourth-quarter results of the company will be announced.
In September, when the investment of Starboard in Yahoo was first disclosed, the activist had forced the CEO to stop making acquisitions and to find out how shares of Alibaba could be eliminated in the most tax-efficient way. According to Starboard, the recent reports that Yahoo may be acquiring CNN of Time Warner Inc.’s or Scripps Networks Interactive has caused some worries because the company hasn’t clarified the intentions it has about its stake in Alibaba, which has a value more than $40 billion as per the latest price. This investment contributes to the market capitalization of the company, which is about $46 billion.
A Time Warner spokesman said that they haven’t been approached by Yahoo for CNN’s acquisition and people with knowledge about the matter have said that the company hasn’t discussed anything with Scripps either. Starboard has asked the company to shares its plans concerning shares in Alibaba, but has warned that it would be a bad move to consider a tax-rich split-off. The letter written by Mr. Smith indicates that this sentiment had been shared by Yahoo when the two heads had met in October. The activist investor has urged the company to separate the Alibaba stake and other Asian investments from the core operations that include internet properties such as websites.
While the move with Alibaba stakes will aid Yahoo in saving taxes through the gains it makes, Starboard believes that it will cost a whole lot more. Tax experts have said that this move is extremely complicated and may not be superior to other alternatives that exist. The exact size of the stake of Starboard in Yahoo hasn’t been disclosed to the public up till now, but it has been referred to as significant by the investor so they do hold power.