The assessment comes from the founder and president of Ironfire Capital after it was revealed last week that Yelp Inc (NYSE:YELP)’s Board of Directors have put a for sale sign on the company and that Yahoo! Inc. (NASDAQ:YHOO) is one of the possible parties interested in buying the company.
“On behalf of Yahoo shareholders, Yahoo and Marissa Mayer should not be thinking about touching this company and I don’t think there is any chance that they will. Yahoo only has $6 billion in net cash and they have already promised the majority of that to come back to shareholders through share buybacks in the future. There is no chance Yahoo buys this company,” Jackson tells Lee.
According to the investor, if Yahoo! Inc. (NASDAQ:YHOO) buys Yelp Inc (NYSE:YELP), people should expect a scene like the ones on Clash of Clans TV commercials where people, in this case shareholders of Yahoo, will be storming the castle
He says, however, that he thinks Yelp Inc (NYSE:YELP) has “value” but that Yelp’s board is putting themselves up for sale is interesting because the whole local space has been in a bit of a Bermuda Triangle for so many companies.
“I don’t think the board intended for this to happen to Yelp because they just announced earnings a couple of weeks ago and one of the things that they disclosed is that their headcount is up 50% year-over-year. It’s up to over 3,000 people working at this company and yet they have had three bad quarters in a row. The stock yesterday was at a 52-week low and now you slap a ‘for sale’ sign on the business? It sort of smacks of doing this out of weakness rather than strength,” Jackson explains.
Because of this, potential buyers like Yahoo! Inc. (NASDAQ:YHOO) will likely not be involved in a bidding war but rather asking questions about the timing of the sale and whether the company is any good to be bought.
Christian Leone’s Luxor Capital Group owned about 9.22 million shares in Yahoo! Inc. (NASDAQ:YHOO) by the end of 2014. Eashwar Krishnan’s Tybourne Capital Management owned about 2.65 million Yelp Inc (NYSE:YELP) shares also by the end of 2014.
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