Trouble looms ahead as Yahoo faces losses, fury, lawsuits, and (yes!) possible proxy fight
Microsoft’s Steve Ballmer showed fiscal prudence and restraint by refusing to bow to Yahoo’s expensive demands and simply walked away.
Now, Yahoo faces an unenviable position, dealing with the fallout from “winning”.
First, Yahoo didn’t win. Maybe its employees did, but not the shareholders. And that’s not how our system is supposed to work. Come Monday morning, expect Yahoo’s shares to be back down below $20/share, a far cry from the $33/share that Yahoo shareholders could have had via Microsoft’s offer.
How attractive can Yahoo be? The company talked with everybody in the industry — Time Warner, NewsCorp, Google, etc. — and no one wanted to dance. Talk about feeling like the ugly duckling today.
Second, as a direct result of the shareholder losses, look for shareholder lawsuits to be filed. The first was likely typed up this weekend and will be ready to submit the moment Yahoo’s stock opens for trading early Monday morning. Among the complaints, namely that never before has a 70% premium (based on Microsoft’s increased offer) looked so unfair.
Third, good luck to Yahoo operating alone. While Yahoo sits on the sideline by itself, Microsoft has shown its willingness to do a major deal to move ahead in the pack. Other targets may not be as attractive as Yahoo, but Microsoft still could leave Jerry Yang & Co. in the dust by purchasing several companies for the price it offered Yahoo.
Fourth, and most interestingly, don’t rule out the possibility of a slate of dissident investors running for Yahoo’s board in the coming proxy vote. And not necessarily Microsoft’s nominees. There are a couple major investment groups with the experience, clout and connections to pull this off, especially if Yahoo’s stock falls into the teens. These dissident candidates would run on the platform of (1) Yang & Co.’s embarrassing mismanagement of the Microsoft talks, and (2) the candidates’ willingness to accept a $33/share offer, should it still be available.
My guess is that Microsoft, having had no part in the proxy campaign, would still be willing to talk to the new Yahoo board, should they be elected. To be continued…
