capstone assignment
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in its decision. . . . We are not opposed to a transaction with Microsoft if it is in the best interests of our stockholders. Our position is simply that any transaction must be at a value that fully reflects the value ofYahoo!, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders.l3
Carl lcahn's Proxy Fight
After Microsoft withdrew its offer on May 3,2008, activist investor Carl Icahn (who had invested in Yahoo earlier and owned 4.98 per cent of Yahoo's common stock) launched a proxy fight to replace all l0 board members with his own nominees at the upcoming annual stockholders' meeting. Icahn's intention was to force the sale of Yahoo to Microsoft upon gaining control of the board.la On July 2l,2}}},Yahoo announced that it had settled with Icahn by appointing him to the board and giving board seats to two of his nominees. In re- turn, Icahn agreed to withdraw his proxy fight. He eventually resigned from yahoo's board in october 2009 and in 2010 began to rapidly decrease his investment in the company.
Third Point LLC's Activismls
Daniel S. Loeb, who headed the hedge fund Third Point LLC, began accumulating yahoo
shares in 2011 and by March 2012 held,5.8 percent of the company's outstanding shares. He began to actively campaign for changes after several unfruitful meetings *itn CgO Scott Thompson. Loeb was firm in demanding that Yahoo's strategic direction should be to find ways to monetize the millions of site visitors per month. Rather than focus on pushing Yahoo into new businesses, which was Scott Thompson's vision, Loeb wanted Yahoo to focus on its media business. He argued that in hiring two executives to the board with a technology background (whichyahoo had done in February 2}r2),yahoo was mov- ing away from the media business. In addition, Loeb demanded that the company sell its Alibaba stake as well as its 35 percent stake in Yahoo Japan and use the capital to strengthen its core advertising business. Loeb filed a proxy statement to gather support for his four nominees (three of whom had advertising backgrounds, the fourth was himself to replace the more technology-oriented yahoo board members.
"Resum6gate"
On May 3,2012, a Silicon Valley Web site reported that Daniel Loeb had written to yahoo,s
board about a possible discrepancy in CEO Scott Thompson's educational background. Loeb had alleged that Thompson had inaccurately indicated that he had graduated with dual degrees in accounting and computer science, whereas in reality he had graduated with just an accounting degree. Since Yahoo had reported Thompson's educational back- ground in regulatory filings, this error amounted to a misrepresentation of facts.16 yahoo's
board admitted that Loeb was correct in his accusations and after an internal investigation, Thompson resigned from the company. patti S. Hart, a member of yahoo's board who
r3Yahoo! Press Release, April 7, 2008, http://files.shareholder.com/downloads/yHOO/2435053555xox1g5760/ ab576752-f008-457a-b678-186098240468NHoo_News_2008_4_7_General.pdf,accessedMay 2,2012. laDavid Litterick, "Yahoo! Rejects Microsoft and Carl Icahn Bid," The Telegraph,July 14, 200g, www.tele$aph. co.uk/finance/newsbysector/mediatechnologyandtelecoms/2'793196/Yahoo-rejects-Microsoft-and-Carl-Icahn-
bid.html, accessed September 18, ZOl2. t5Evelyn M' Rusli, 'Activist Investor Charls Plan to Revitalize Yahoo," The New yorkTimes, March 9,2012, pp. B1, B5; and proxy statements filed by Third Point LLC, http://files.shareholder.com/downloads/yHOO/ 2435053555x0x5899140-12-1761 101 1006/fl1ing.pdf, accessed May 2,2013 and http://flles.shareholder.com/ downloads/YHoo/2435053555x0xS899140-12-204/101 1006/filing.pdf, accessed M ay 2,2012. r6Poornima Gupta, "Yahoo CEO Scott Thompson's Resume Is Faked, Third point Alle ges," The Hffington Posl, www.huffingtonpost.com/2012/05103/scott-thompson-resume-yahoo_n_1475700.htm1, accessed September I 8. 201 2.
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