Dan Loeb is dramatically scaling back his bet on Yahoo Inc. The internet giant has agreed to buy 40 million shares of stock — or two-thirds of the total — owned by Loeb’s firm, Third Point, at 29.11 per share, the closing price of Yahoo on July 19. This leaves the New York hedge fund with 20 million shares, or less than 2 percent of Yahoo’s outstanding shares. As a result, Third Point made about $656 million on the shares it is selling, a gain of 129 percent, based on its original investment of 45 million shares at an average price of $12.72 reported in September 2011. At one point, Third Point owned as many as 70.5 million shares.Yahoo fell more than 4 percent on the news, to close at $27.86.
In addition, Loeb and two other directors originally nominated by Third Point, Harry Wilson, and Michael Wolf, have resigned from the board, effective July 31. Max Levchin, who was appointed as a director upon mutual agreement between Third Point and the board, will remain on the board. The 40 million shares Yahoo is purchasing from Third Point counts as part of the company’s previously announced a plan to purchase an additional $1.9 billion of stock.
Hedge funds cut their long positions in all segments of the U.S. equity market, according to Societe Générale’s monthly hedge fund report, dated July 12. They especially cut back on their exposure to the Nasdaq market. On the other hand, hedge funds kept long Nikkei positions mostly in place thanks to the weakening yen. Hedge funds are most bullish, however, on the Russell 2000, followed by the Nikkei.
Interestingly, the Societe Generale report shows little enthusiasm among hedge funds for the U.S. dollar, whether versus the euro or sterling. Among commodities, hedge funds held bullish positions in oil, which was wise given its recent rise in price. At the same time, they were net short copper. “Oddly enough though, some hedge funds kept exposure to gold when its price plummeted, ignoring the risk of higher real yields and a stronger dollar,” Societe Generale added in its report.
Talk about a short squeeze. Shares of Herbalife Monday surged another 6.43 percent, to $59.39. The stock is now up about 80 percent in the calendar year alone. The stock is a huge short position of Pershing Square founder William Ackman.
Two high-profile tech stocks favored by a number of hedge funds that sold off sharply on Friday rebounded somewhat on Monday. Google rose 1.57 percent Monday to close at $910.70, while Microsoft jumped nearly 2 percent to close at $32.01.