If you have noticed, there is an uprising in the number of activist investors looking to dictate the strategic directions of troubled companies. These activists tend to have something in common—their overblown egos and the concerted belief they can do better than the existing management.
What activist investors want to do is assign their own chosen board members to serve as their eyes and ears on the inside of the boardroom and act as a vessel to change things. Sometimes it works; sometimes it doesn’t.
United Continental Holdings Inc (NYSE:UAL), which struggled to find growth amid internal strife and battles at the company when ex-CEO Jeff Smisek was running the flight deck is now on the block after activist investor Brad Gerstner of Altimeter Capital stepped in. He is looking to assign some of his own board members to kick-start changes. Only time will tell if he can get the airliner delivering better growth.
Then there is hedge fund manager Bill Ackman of Pershing Square Capital Management who is currently on a bad losing streak, hindered by the massive drama occurring in the boardroom of Valeant Pharmaceuticals Intl Inc (NYSE:VRX).
I recently discussed the situation at Valeant and in a little more than two weeks since my article, Ackman apparently had enough of a fiasco there. CEO Michael Pearson is out the door, along with several board members. Ackman will be on the board but time will tell if there are more dirty secrets to surface from that boardroom.
Activist investor Carl Icahn has his hands in many companies including Herbalife Ltd. (NYSE:HLF), a short position of Ackman’s, and Freeport-McMoRan Inc (NYSE:FCX).
20 Years Later: Yahoo Still in Search of an Identity
The biggest battle in the boardroom at this time is at Yahoo! Inc. (NASDAQ:YHOO), which under CEO Marissa Mayer (I bet she wishes she stayed at Alphabet) has failed to find its direction in the highly competitive Internet space, while companies like Facebook Inc (NASDAQ:FB), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc (NASDAQ:GOOGL) surge forward.
For Yahoo, it has been a history of disappointment since it was an early entrant to the Internet space with the exception of its shrewd 15% investment in Alibaba. YHOO doesn’t want to divest it, though, due to a massive tax hit from Uncle Sam.
YHOO stock has underperformed the S&P 500 with a decline of 22% over the past 52 weeks.
Chart courtesy of www.StockCharts.com
After years of watching YHOO do very little as far as innovation or even what it wants to be, investors are getting frustrated. In comes activist investor Starboard Value.
I would be surprised if Starboard doesn’t want to show Mayer the door.
Starboard is seeking drastic changes starting with the replacement of the entire boardroom at Yahoo. The fact Starboard owns a mere 1.7% of YHOO stock and wants to change the company’s direction is a surprise that will likely set up a proxy battle.
The reality is that Yahoo needs a major overhaul, which could set it up for a sale. Yahoo has focused on its core segments of mobile, video, and social media, but it faces a tough upward battle, given the competition out there from FB, NFLX, and GOOG stock, to name a couple.
I’m not sure what is in store for Yahoo, but given it is estimated to see revenue contract another nine percent this year, there is clearly a sense of urgency. That likely will not include Mayer at the helm.
So, let the battles begin in corporate America.