Yahoo!’s hanging chads

Yahoo! (YHOO) is a famous listed company. At the height – back in 2000 – of the Dot Com bubble, their shares were worth almost $120 each. Heady days. Heady days.

Anyhoo, that was then. The company is a little less sanguine these days, trading range-bound around $20 a share. Unimaginative management can think of little more than rearranging the furniture in the hopes that something exciting happens.

As one erstwhile Yahoo! peon has it:

When Hillary Schneider was promoted in Spring of last year to run HotJobs, Autos, Real Estate, Local, Shopping, Travel and Personals, we were all moved across campus into one larger org for no reason other than to ensure that our customers would be better served. Then, when Hillary moved on to run Sales for Yahoo (but kept HotJobs) at the end of the summer and we were moved back to our old homes, it was only to meet the needs of our customers again. When that uber-org was divided up in November and Autos and Real Estate went to our old Media group while the others fell under the Search group, it was because our customers demanded it.

So it must have come as quite an exciting thing for many investors when, out of the blue, Microsoft turned up and offered them $31 a share for their lemon.

Now, investors have a whole bunch of ways they can spend their money. A share is a promise of a future return. Same as a house, really. If you bought a house in the hopes of a fantastic capital gain, you’d be pretty peed off if the market tanked shortly after your purchase, stranding you with an expensive, unsellable asset. But if somebody turned up unexpectedly at the front door and offered you significantly more than you paid for it, you’d give their offer due consideration. You wouldn’t chase them out the door.

Could be that this stranger has an amazing plan to double the value they pay for it. Could be they’re a twit with more money than sense. Not really your problem. Of course, if you had chased him away, you’d get it in the neck from your spouse later that evening.

Which is why, after Yahoo! management rejected Microsoft’s offer outright they had to deal with Carl Icahn, celebrity minority-rights investor. So far so normal, and so old news.

What was surprising about their recent AGM was that votes against the board’s decision were so muted. This left Mr Icahn bewildered and stranded, even if he did get three seats out of his performance. I mean, what has happened to modern capitalism if people can’t be expected to look after their own investments?

Turns out that Yahoo! had a little hanging chad problem. Following an audit, it was found that 100 million shares had not been accurately reflected, a situation blamed on a printing mix-up by an intermediary processing firm. The new figures show that nearly 40% of shares were withheld from the re-election of chairman Roy Bostock, not 20% as originally indicated.

Amazing how these errors always seem to go in favour of the incumbent? Still, with the stakes so high, it is no surprise that it isn’t just Zimbabwe that needs election monitors and external supervision.

Time to introduce such scrutiny in the board and at corporate AGMs, me thinks…

As for the Microsoft offer, well, I can’t emphasize how relieved we are that we did not sell ourselves short. All of us who are working in the trenches know the full potential of Yahoo! Sure, we may be losing market share in search to Google every month and we may be losing market share in pageviews to social networks, but our future has never been brighter! As the market grows and our share declines, our opportunities for growth only increase! Simple math there. We have another 80% of the search market left to capture – Google only has about 30%. Now, whose future is truly brighter?

2 replies »

  1. The vote miscount is being billed as an innocent mistake, of course. You’re not the only one asking questions about it, though. Henry Blodget says there’s more ‘splainin’ to be done, as well.

    The assertion of the board is that Yahoo! is worth way more than $31 a share. I guess we’ll see.

  2. Yes, the board does say that and, if they haven’t managed to produce that value in a year, then chances are Yahoo shareholders will be … somewhat livid.