Activist hedge fund Third Point LLC has announced an agreement to sell two-thirds of its stake in Yahoo Inc back to the company for a profit. Third Point has agreed to sell 40 million of its shares back to the company and keep about 20 million shares of its stake. The agreement calls for Yahoo to pay $29.11 apiece for the shares. The bulk of Third Point’s stake in Yahoo was amassed during a one month period in 2011, when the company bought about 45 million shares of Yahoo at an average price of $13.02 each.
It was unclear why Third Point, headed by Daniel Loeb, decided to sell its shares now, but Loeb expressed his confidence in Yahoo’s prospects in a statement released by the hedge fund. However, the move by Third Point may prompt other shareholders to also re-evaluate their investment in Yahoo. JMP Securities analyst Ronald Josey said, “Probably a lot of investors are saying, ‘We had a pretty good run here, it makes sense to take some off the table.’ Much like a lot of investors followed Third Point in, a lot will follow Third Point out.”
Before he joined the board, Loeb was one of Yahoo’s most vociferous critics and was quite vocal in blaming management for the ineffective performance of the company and an incoherent revival strategy. In 2011 and 2012, Loeb waged an aggressive, no-holds-barred campaign to upend Yahoo’s management. The campaign led to accusations that then-CEO Scott Thompson had padded his resume with a non-existent computer science degree and resulted in Thompson’s resignation.
Yahoo went through a succession of CEOs before Chief Executive Marissa Mayer took the job. Mayer, a former Google Inc executive, is about a year into a plan to try to turn around the struggling Internet company. The Yahoo stake was Third Point’s single largest corporate holding.
Third Point is also relinquishing three seats on the board of Yahoo. After months of criticizing the company, Third Point settled a bitter proxy battle with Yahoo last year. The resignations of directors Loeb, Harry J. Wilson and Michael J. Wolf were part of a deal reached in May 2012. Third Point agreed to quit the board if its stake in the company fell below 2 percent. Adam Seessel, head of Gravity Capital Management, said, “He’s done a lot of good stuff for Yahoo and we’ll miss him. But it’s not like he’s essential to the turnaround. The people that are essential now is Marissa and her team.”
