Yahoo announced today that it was repurchasing 40 million of its shares from activist investor Third Point, bringing the hedge fund’s Yahoo stake to below 2%. That means that Third Point head Dan Loeb, along with two other directors who were brought on because of a push for change by Loeb, will be resigning from Yahoo’s board. In a statement, Loeb said he is confident in Yahoo CEO Marissa Mayer, but the company’s recent earnings show it still has work to do in boosting revenue.
Yahoo’s board size will be reduced to seven directors, who will examine the board’s size and composition to see if other changes are needed. Mayer praised Loeb for his “vision to see Yahoo for its immense potential.” Loeb said he is confident that with “Marissa at the helm and her team’s focus on innovation and engaging users, Yahoo! has a bright future.”
Loeb played an important role in changing Yahoo’s management into what it is today. He began pushing for changes in 2011 in the wake of the company firing former CEO Carol Bartz in September of that year. Loeb eventually lobbied for a few board seats while also advocating to oust Yahoo co-founder Jerry Yang from the company’s board. In 2012, Yang resigned from the board and longtime board chairman Roy Bostock, who got into arguments with Loeb, also stepped down.
Loeb was also responsible for outing the resume falsification of Scott Thomson, the former PayPal executive who had been hired to replace Bartz at Yahoo. Thompson falsely claimed he had a bachelor’s degree in computer science. After Loeb publicized the false claims, Thompson left Yahoo. Loeb was then on the Yahoo board that brought Mayer in as the new CEO.
Since then, Mayer has injected Yahoo with positive buzz by attracting young talent and hip acquisitions, including the blogging site Tumblr and new reading app Summly.
Yahoo’s shares have also risen since she became CEO, but some of that is due to Yahoo’s 24% stake in the Alibaba Group, China’s largest e-commerce company, which is slated to go public. Alibaba’s fast growth (its net income was up by 189% in the last quarter) will be a windfall for Yahoo once the Chinese company has its IPO.
But as for Yahoo itself, its revenues fell by 7% in the second quarter, partly because of a drop in display advertising and search revenues. That’s the part of the business that needs to be turned around.
Loeb is happy because he made a huge profit on Yahoo, selling the 40 million Yahoo shares at $29.11 a share, compared to his $13.50 a share purchase price. But Yahoo’s performance shows it still needs investors to hold its feet to the fire. With Loeb off the board, that’s one less person to call Yahoo out on its missteps.