He’s back!
Dan Loeb, that is. The founder of the $8 billion hedge fund Third Point Thursday disclosed he has taken a 5.1 percent stake in Yahoo, whose CEO Carol Bartz was fired earlier this week. He also threatened to launch a proxy fight.
I don’t know about you, but I am very excited that the old, biting, acerbic, downright disrespectful rhetoric is back as well. Although the eclectic Loeb has been beating the market the past few years by investing in gold, auto parts companies and select short sales, among other things, I was starting to think he lost his mojo. I was wrong.
Sure, he has used his quarterly letters of late to attack the actions of the Obama Administration. But that is not the same.
But his letter to Yahoo’s board is vintage Loeb. Saying he is seeking changes in both the board of directors and company leadership, he asserted there is hidden value “which has been severely damaged – but not irreparably – by poor management and governance.”
But that’s only him getting started. He then goes on to say he is happy with the decision to Bartz, “given her abysmal performance over the last two and a half years.”
He points out that Bartz’s poor decision-making and communication skills publicly alienated the company’s highly respected Asian partners, shareholders, sell-side analysts, bloggers, customers and employees. (that doesn’t leave many others left.) “While the decision to hire her alone is grounds for questioning the Board’s competence, its willingness to turn a blind eye to these serious problems and inexplicably remain supportive of Ms. Bartz notwithstanding the negative impact she was having on the Company is even more troubling,” he adds.
He also says the Board “made a gross error” turning down Microsoft’s $31 per share offer in 2008. The stock closed at $13.61 yesterday, before rebounding about 3 percent on the news of the firing. Loeb says the stock’s intrinsic value exceeds $20 per share.
He insists that replacing the CEO will not be enough to alter the company’s direction. Rather, he believes the board needs a major overhaul. He calls for the resignation of chairman Roy Bostock, as well as directors Arthur Kern and Vyomesh Joshi, “who have stood by silently during these last five years of woeful performance.” He also urges the resignation of director Susan James, the President of Tri-Valley Animal Rescue, a close friend of Bartz’s.
Loeb adds that his firm has held discussions with many “highly respected entrepreneurial executives” active in technology, internet, media and consumer-related businesses. “From these discussions we have distilled an All-Star team of potential Director candidates, who would be indispensable in working with the reconstituted Board to pursue the three paths outlined in the recent company announcement: CEO search, business review and strategic options,” he adds.
Loeb also says he may propose his own slate of directors at the company’s annual meeting next year should it become necessary. “Such proxy disputes are burdensome, and we sincerely hope that one will not be necessary here,” he adds. “Shareholders have already suffered enough.”
In case you’ve forgotten, here are a few highlights of Loeb’s past broadsides.
Several years ago he wrote the following to the board of directors of Salton, Inc. and its CEO, Leonhard Dreimann: “What is most astounding about the company’s apparent death spiral is Mr. Dreimann’s inexplicably insouciant attitude and the fact that he remains in charge.”
After lambasting the company for spending huge sums to advertise at the U.S. Open, Loeb wrote: “What is equally shocking as Mr. Dreimann’s poor management, behavior and the fact that he is awarded anything more than subway tokens for his transportation needs is that this Board of Directors has sat idly by while he lays waste to this company.”
Then there was the February 2005 letter to Irik P. Sevin Chairman, President and CEO Star Gas Partners L.P., where Loeb asserted: “Your ineptitude is not limited to your failure to communicate with bond and unit holders. A review of your record reveals years of value destruction and strategic blunders which have led us to dub you one of the most dangerous and incompetent executives in America.”
And in June 2006, he and one of his analysts quit the Board of Massey Energy, citing the board’s “misguided insistence on keeping” Don Blankenship as chief executive.
It’s nice to have the old Dan Loeb back.
Dan Loeb will be speaking at Delivering Alpha, a joint conference by Institutional Investor and CNBC where the best-known hedge fund managers and the largest investors globally as well as illustrious political and economic commentators will focus on current thought leadership in investing.
On Wednesday 14th, Institutional Investor will be running a live blog of everything that happens at the conference.
