SAN FRANCISCO: Yahoo board member and activist hedge fund manager Dan Loeb supported the decision allowing chief executive Marissa Mayer to re-evaluate plans for the cash the company gets for selling a portion of its Alibaba stake, according to a source familiar with the board's thinking.
Yahoo said on Thursday it might rethink its previously announced plans to return the multibillion-dollar cash windfall to shareholders.
Shares of Yahoo were down 5.2 percent to $15.18 in afternoon trading on Friday as some investors were disappointed about the potential change.
Yahoo struck a deal with Alibaba in May in which Yahoo was to sell one-half of its 40 percent stake in the Chinese internet company for at least $6.3 billion in cash and up to $800 million in new Alibaba preferred stock.
The board of directors, including Loeb, backs Mayer's long-term vision for Yahoo, the source said. That vision could include more creative uses of the Alibaba cash than undertaking a share buyback, the source added.
The source declined to be named due to lack of authorisation to speak about board deliberations.
Mayer, a former Google executive, was hired in July to revamp Yahoo. A web pioneer, Yahoo has seen its revenue fall amid competition from Google and Facebook, and changes in the online advertising market.
Mayer will look at the company's growth and acquisition strategy, the restructuring plan launched by her predecessor, and Yahoo's cash and capital allocation strategy, Yahoo said in Thursday's filing with the Securities and Exchange Commission.
Some analysts expect Mayer to use the cash from the Alibaba deal to finance new acquisitions -- a scenario that some investors may be wary of, given Yahoo's poor track record with expensive acquisitions in the past.
"We think it is now more likely than not that Yahoo will make material acquisitions and we think investors may have doubts that acquisitions will create value," wrote Bank of America analyst Justin Post in a note to investors Friday. The bank downgraded Yahoo's stock to a neutral rating following the announcement about the Alibaba cash and Mayer's review of the company's plans.
Loeb's support for a plan that might keep money inside the company is somewhat unusual for an activist hedge fund investor. Such investors typically take big stakes in under-performing companies and push for changes that result in the relatively swift return of money to shareholders - through share buybacks, special dividends, asset sales or the sale of the whole company.
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