Bill Ackman is one of the most notorious activist investors on Wall Street, which is why his moves are followed closely. Recently, Mr. Ackman’s firm, Pershing Square went public not in the US, but in Netherlands, on the Euronext Amesterdam stock exchange. While the stock of the company declined to $22 from $25, Mr. Ackman kept his optimism and said that it was a good thing, because otherwise the stock would’ve been considered underpriced, according to Bloomberg. Moreover, Mr. Ackman said that Pershing Square is considering to acquire a significant position in a US company with more news coming in the following months. However, Mr. Ackman’s words made us wonder, which company he might be targeting and one of the ideas that came to mind was Yahoo! Inc. (NASDAQ:YHOO).
Why Mr. Ackman might be interested in Yahoo! Inc. (NASDAQ:YHOO)? There are several reasons. The company has had a long history of various activist investments, which helped the company grow and improve its situation. A couple of months ago, we discussed Dan Loeb‘s involvement in Yahoo, which has had a happy ending. Mr. Loeb was the man behind many changes, the biggest one being the appoitment of Marissa Mayer as the CEO of the company. Mrs. Mayer helped the company to improve its situation, with the stock surging by 70% since 2012. Recently, another activist investor stepped up, Jeff Smith, the manager of Starboard Value, who sent a letter to Marissa Mayer by proposing several measures, one of which being a merger with AOL, Inc. (NYSE:AOL). Moreover, recent speculations say that Mr. Smith, who still has not disclosed the amount of shares it owns in Yahoo! Inc. (NASDAQ:YHOO), might be seeking the support of smaller investors to overturn the management of the company.
Another reason for Mr. Ackman to get involved in Yahoo! Inc. (NASDAQ:YHOO) is the fact that despite the stock price growing over the last several years, Yahoo is still considered to be underperforming. The company’s core business has been suffering with the company losing revenue from its core advertising business. However, Yahoo has sources of cash that might help it turn things around and maybe activist investors stepping up, might help to speed things up. In addition, Yahoo! Inc. (NASDAQ:YHOO) has something valuable that it might offer to investors. The company owns two large investments in two Asian countries, Yahoo Japan and Alibaba Group Holding Ltd (NYSE:BABA). These assets can help the company to protect is core business, although Yahoo has sold almost a half of its position in Alibaba after it went public. Now, activist investors might push for Yahoo to unlock the value from the stakes in the Asian companies (Mr. Smith has already suggested it in his letter).
In addition, investor and author Josh Brown said earlier that Yahoo! Inc. (NASDAQ:YHOO) stock drop in the last month, might make the company a perfect target for big activists such as Mr. Ackman or Carl Icahn.
In this way, Mr. Ackman’s intervention might be something that Yahoo! Inc. (NASDAQ:YHOO) might need to further unlock shareholder value. The manager of Pershing Square has a great track record of helping companies improve their situations and gain value. Mr. Ackman improved the situation at Canadian Pacific Railway Limited (USA) (NYSE:CP), influencing the replacement of the company’s CEO and helping the stock surge by around 180%. Moreover, currently, Pershing Square tries to acquire Allergan, Inc. (NYSE:AGN), together with Valeant Pharmaceuticals Intl Inc (NYSE:VRX) leading a rather “aggresive” proxy fight with the company.