Dan Loeb Wants A Seat At Yahoo's Table

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Make that two seats!

Dear Members of the Board of Directors:

As you are aware, Third Point LLC (“Third Point”) manages investment funds that are, collectively, the second largest shareholder of Yahoo! Inc. (“Yahoo” or the “Company”).

We are deeply concerned by news reports that you are considering a leveraged recapitalization that will allow private equity firms to gain substantial equity positions that will, when combined with Jerry Yang’s and David Filo’s ownership, effectively establish a controlling position in Yahoo. More troubling are reports that Mr. Yang is engaging in one-off discussions with private equity firms, presumably because it is in his best personal interests to do so. The Board and the Strategic Committee should not have permitted Mr. Yang to engage in these discussions, particularly given his ineptitude in dealing with the Microsoft negotiations to purchase the Company in 2008; it is now clear that he is simply not aligned with shareholders. At a bare minimum, Mr. Yang must declare whether he is a buyer or a seller – he cannot be both. If we are correct and he is effectively a buyer, corporate ethics require him to recuse himself from any further discussions on behalf of the Company. He should also be requested by the Company to promptly leave the Board and join Mr. Filo in solely an operating capacity.

In our view, a leveraged recapitalization makes no sense and its only purpose would be to put substantial equity stakes into friendly hands to entrench management and transfer effective control without payment of a premium or even, it appears, a shareholder vote. Nothing can excuse such an action, and shareholders will not be bought off with a dividend of our own money while value is destroyed.

Moreover, such a transaction would undermine the basic tenets of free markets, including democratic voting, accountability and fairness. We do not blame our friends at the private equity firms rumored to be involved for trying to get the best deal possible for their investors; we have great respect for these firms and their leaders - Jim Coulter of Texas Pacific Group, Jonathan Nelson of Providence Equity Partners, Glenn Hutchins of Silver Lake, Henry Kravis of KKR and Stephen Schwarzman of Blackstone. However, we at Third Point are also in the value-maximizing business. We will not tolerate any transaction which appropriates for insiders opportunities that duly belong to current Yahoo shareholders. However, we would welcome the prospect of any of these firms’ presence on a reconstituted Yahoo Board of Directors and work on a long-term strategy for the Company should it be necessary for us to pursue a proxy contest next year.

If you, as board members, undertake the current course of action, Third Point will hold you personally responsible for such a flagrant violation of your duty of loyalty. Any transaction with a third party who assists members of management and the board in protecting their jobs, and/or involves the effective sale or transfer of control without payment of a control premium, will likewise be subject to scrutiny.

Given the Board’s inability – or perhaps unwillingness- to properly solicit true strategic alternative bids, let alone to negotiate them, Third Point demands that we be awarded two board seats – those created by the vacancies of Chairman Bostock and Mr. Yang, or two newly-created ones. We are prepared to assume these positions immediately.

Sincerely,

Daniel S. Loeb
Chief Executive Officer
Third Point LLC

[Businesswire via AllThingsD]
Earlier: Dan Loeb Would Like A Word With The Yahoo Board

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Memo To Yahoo: Dan Loeb Will Personally Shake Out ALL The Skeletons In Your Closet If He Has To

As you may have heard, Third Point Management is currently waging a proxy battle against Yahoo, of which it owns 5.81 percent. Last September, the hedge fund and its founder, Dan Loeb, wrote a letter to the company's board of directors entitled "The Failures of Yahoo’s Board of Directors Necessitate a Significant Infusion of Fresh Board Talent," in November it demanded two board seats in order to rest the ship from a bunch of bumbling incompetents, and in February, it said actually, make that four seats. Unfortunately, Yahoo resisted. Which is why yesterday, Loeb and Third Point were forced to enter into the record some damning evidence showing current YHOO CEO Scott Thompson to be a dangerous, dangerous liar, the likes of which the search engine would be wise to sever ties. Specifically, Third Point revealed that contrary to statements made on SEC filings, Thompson? Did not graduate from Stonehill College with degrees in both computer science and accounting but only the latter. The reason Third Point knew this to be true was because it Googled Stonehill College and found that the school did not even start offering computer science degrees until 1983, well after the time Thompson graduated. So, a liar and a liar who can't even be bothered to cover his tracks to boot. Oh, but the résumé chicanery did not stop there. Yahoo director Patti Hart, Third Point, went on to reveal, also had her own little C.V. "error" to speak of. Whereas Ms. Hart claimed to have graduated from Illinois State University with degrees in marketing and economics, in fact, merely earned a bachelors in business administration and specialized in marketing and econ. Yahoo, which yesterday confirmed the résumé duplicity, clearly needed no further substantiation that these two were academic frauds. Third Point and Loeb knew this much to be true. AND YET. As of 2PM today, a whopping twenty-four hours after their lies caught up to them, they remain employed by the company. So now this is happening because apparently some people need to be put on a deadline: Dear Board of Directors: Yahoo!’s initial response yesterday to Third Point’s identification of material inaccuracies in both CEO Scott Thompson’s and Director Patti Hart’s educational record was insulting to shareholders. We assume that these initial statements were attributable to Mr. Thompson and were not made with the Board’s approval. While we appreciate the Board’s statement late last night that it would conduct an investigation, unfortunately, for this Board and this Company, it is too little and months too late. To assert that years of inaccurate SEC filings, website biographies and, most likely, D&O questionnaires and curriculum vitae (including, presumably, the CV provided to Yahoo! when Mr. Thompson reached out for the job) were “inadvertent” is, in our view, the height of arrogance. Mr. Thompson and the Board should make no mistake: this is a big deal. CEO’s have been terminated for less at other companies. The Company’s Preliminary Proxy Statement filed on April 27, 2012 (at page 22) states that the “minimum qualification for service as a director of the Company are that a nominee possess...an impeccable reputation of integrity and competence in his or her personal and professional activities.” Furthermore, Yahoo!’s response “confirming” that Ms. Hart “specialized” in Marketing and Economics, rather than having earned her degree in such subjects (as Ms. Hart has asserted in filings for years) is a similar canard. A “specialty” is not a major. It is not a “minor”. We don’t know what it is, but we do know that like Mr. Thompson, Ms. Hart has been misrepresenting her actual degree to the investing public for years. Again, we hope that the Board does not accept this feeble attempt at “spin” as a justification for Ms. Hart’s misrepresentations. Irreparable damage to Yahoo!’s culture will continue every day that the Board allows Mr. Thompson and Ms. Hart to remain at the helm of the Company after having clearly demonstrated that they lack even the “minimum qualifications for service as a director of the Company.” Mr. Thompson, in particular, cannot possibly have any credibility remaining with the all-important Yahoo! engineers, many of which earned real – not invented – degrees in computer science. Moreover, permitting Mr. Thompson and Ms. Hart to stay with the Company after apparently violating the Code of Ethics sends a message to all Yahoo! employees that a different set of rules applies at the top. Third Point, Yahoo!’s largest outside shareholder with over $1 billion invested, called yesterday for an immediate investigation if our assertions were true. The Board appears to have acceded to this demand. Its response must be swift and decisive. In that regard, Third Point will consider it grounds for further action if the Board does not take the following steps by Noon EDT on Monday, May 7th: 1) Publicly reveal the process by which it vetted Mr. Thompson as a potential CEO candidate. This disclosure should include the release of all minutes of any meeting at which Mr. Thompson’s candidacy was discussed and any reports or other materials upon which directors relied to evaluate Mr. Thompson’s candidacy. 2) Disclose whether any Board member, including Maynard Webb, who has long-standing ties to Mr. Thompson, and Ms. Hart, who headed the Search Committee, was aware of Mr. Thompson’s deception prior to receipt of Third Point’s letter yesterday. 3) Provide shareholders with all information regarding the director nomination process, including the so-called “skills matrix” referred to in the Company’s preliminary proxy statement, which the Board purportedly used to determine the qualifications of various candidates, including Third Point’s nominees. 4) Terminate Mr. Thompson for cause immediately given his demonstrable unsuitability to remain Chief Executive Officer and a director of Yahoo! and accept the resignation of Ms. Hart for similar reasons. Finally, we urge the Board to stop wasting valuable company resources and drop its resistance to placing the Third Point nominees on the Board. We are prepared to join immediately. Once on the Board, our first tasks will be to work with the remaining Board members to find Yahoo! a new leader with the qualifications and integrity to lead the Company and install best practices of corporate governance. The Company can ill afford to continue this misguided fight with its largest outside shareholder while it has so many other fires to put out. There has been enough damage already. Sincerely, Daniel S. Loeb Chief Executive Officer Third Point LLC So, take the weekend to mull it over and while you're at it, consider gathering documentation of other potentially false claims such as: 1. His first-place finish in his 3rd grade spelling bee (do you really think a future Stonehill grad would know how to spell 'abhinaya'?) 2. That he bought Apple stock at $76/share (RIGHT) 3. That he can bench 285 (sure) 4. That he graduated high school (just don't know) 5. His circumcision (do you want to get to the bottom of this guy or not? If he lied about comp sci, who knows what else he'd lie about) Third Point Demands Yahoo C.E.O. Be Fired by Monday [Dealbook] Loeb Asks Yahoo To Fire CEO By Monday [MarketWatch]

Yahoo! RésuméGate, Day 9: Scott Thompson Didn't Even Offer Yahoo The Courtesy Of A Fake Résumé

Last Thursday afternoon, hedge fund manager Daniel S. Loeb, who is waging a proxy battle against Yahoo, made a simple request: that the board of directors fire CEO Scott Thompson, who had lied about having a computer science degree from Stonehill College, when in fact the academic fraud only graduated with a degree in accounting. Loeb wanted the job done by Monday at 12 noon, EST and as the deadline passed, it was clear the request was would not be honored. As a result, Loeb was forced to demand every single document related to Thompson's hiring at the company. Emails, heading hunting referrals, thoughts, feelings, the works. Most importantly, the résumé Thomspon submitted when applying for the gig. Did Loeb enjoy dragging this out? No. Did he take pleasure in watching the "carnage" unfold? Certainly not, and he's shocked and offended anyone would ever think that. Nevertheless, a computer science degree had been fabricated out of thin air and Loeb felt he owed it to shareholders to get some answers. And while Yahoo! has presumably not yet faxed over the documents he asked for, they did offer this: Apparently the Yahoo chief says he's being honest when he tells us no fake résumés were submitted to Yahoo because they never got any résumés, period. Yahoo‘s embattled chief executive, Scott Thompson, told the company’s senior management on Thursday that he never submitted a résumé or falsified his academic credentials, a person briefed on the matter said. [Dealbook]