Third Point puts pressure on Yahoo

PUBLISHED : Friday, 06 April, 2012, 12:00am
UPDATED : Friday, 06 April, 2012, 12:00am


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After Alibaba Group's recent failed talks to buy back its shares from Yahoo, hedge fund Third Point is ratcheting up pressure on the struggling internet pioneer to fully exploit the value from its stake in the mainland e-commerce giant.

Third Point, Yahoo's largest outside shareholder with a 5.8 per cent stake, described the privately held Alibaba as a 'valuable Asian asset' with 'significant growth potential' in a new blog,, which it launched this week in order to set out its concerns with Yahoo's board of directors.

The New York hedge fund's online foray is part of a proxy battle it is waging to get four seats on the Yahoo board for its 'Shareholder Slate' of nominees, including Third Point chief executive Daniel Loeb.

'The Shareholder Slate's experience in evaluating financial assets and negotiating complex financial transactions could help realise the true value of Yahoo's investment in Alibaba for the benefit of all shareholders,' it said.

Yahoo stated in its recently published fourth-quarter report that its investment was worth more than US$14 billion as of January. In October 2005, Yahoo invested US$1 billion in cash and injected its mainland business, Yahoo China, into Alibaba in exchange for a 40 per cent equity interest in the mainland firm.

'The Shareholder Slate believes the size of Yahoo's stake in Alibaba and the growth trajectory should continue to create meaningful shareholder value for Yahoo investors,' the Third Point blog said. 'We believe a 20 per cent increase in the value of Alibaba would drive almost US$2 in value per Yahoo share, and we see far more upside potential in this asset.'

In his letter last month to Yahoo chief executive Scott Thompson, Loeb wrote that Third Point was in favour of Yahoo keeping its stake in Alibaba 'unless it can get fair value'.

Alibaba's flagship company is Hong Kong-listed, the world's largest business-to-business e-commerce service provider with 76.33 million registered users. It also runs the three closely held Taobao units which lead the mainland's online shopping market.

A spokesman for Alibaba in Hong Kong declined to comment on the Third Point blog's content.

Negotiations for Yahoo to sell back most of its stake in Alibaba and in Softbank-controlled Yahoo Japan collapsed in February, despite efforts at a deal with tax advantages to the seller. Reports in December said this deal would have generated US$17 billion, which Yahoo could have used to rebuild its business.

A person familiar with the transaction said yesterday that the 'lines of communications between the companies remain open'.

Yahoo has estimated it will make US$375 million in savings from its move this week to cut 2,000 jobs worldwide. Third Point criticised the timing of the layoffs, which was done before Yahoo's Thompson unveiled a new 'strategic plan'.