) announced that it will repurchase 40 million shares of its
common stock held by hedge fund Third Point for $29.11 per share.
Third Point was Yahoo's largest investor, so the news sent Yahoo!
shares down 4.29%.
The company stated that the transaction will be funded
primarily with cash and will be accretive to earnings per share
(EPS). The company now has less than $700 million available under
the existing $5 billion buyback plan announced last year.
The transaction will leave Third Point LLC fund with about 20
million shares, giving the company less than 2% ownership in
Yahoo. All three directors nominated by Third Point -- Daniel S.
Loeb, Harry J. Wilson and Michael J. Wolf will resign from
Yahoo's board on Jul 31.
In 2012, Daniel Loeb, through his Third Point LLC fund, had
amassed millions of Yahoo shares as he tried to influence the
company's operations more effectively. Loeb had revealed that
Yahoo's former chief executive Scott Thompson's academic
credentials were inflated, which led to Thompson's departure in
Very soon Loeb was added to the company's board of directors,
and two months later Marissa Mayer was announced as the new chief
executive officer of the company. Mayer had been focusing on the
Internet company's strong franchises, including e-mail, finance
Recently, Mayer stated that Yahoo is intent on getting the
right people on board, which would result in properly focused
products, leading to stronger traffic, and thereby revenues. Her
leadership has proved beneficial for Yahoo, as evident from the
share price increase of 76.78% in last year.
Now, at a point where Yahoo is making money, Loeb's decision
to cash his profit and depart might be a matter of concern for
investors and the reason for the slight decline in share price.
However, we remain confident about Mayer's strategy and believe
that the company is headed in the right direction. Also the
company's second-quarter non-GAAP earnings exceeded the Zacks
Consensus Estimate driven by Yahoo's equity holdings in Alibaba
and Yahoo Japan.
Yahoo shares currently have a Zacks Rank #2 (Buy). Other
stocks that are performing well at current levels include
), all carrying a Zacks Rank #1 (Strong Buy).
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