Yahoo’s entire board should be axed, activist investors at hedge fund Starboard Value said on Thursday, setting out plans to replace them with their own picks, including Starboard managing partner Jeffrey C Smith.
“[W]e have been extremely disappointed with Yahoo’s dismal financial performance, poor management execution, egregious compensation and hiring practices, and general lack of accountability and oversight by the Board,” wrote Smith in a letter to fellow shareholders. “We believe the board clearly lacks the leadership, objectivity, and perspective needed to make decisions that are in the best interests of shareholders.”
Once one of the kings of the tech scene, Yahoo has struggled to find its niche in an evolving digital world and under current chief executive Marissa Mayer, its attempts to find inroads in sectors including online media have failed.
Following a string of losses in new business units including news and video – the latter resulting in a $42m writedown last year – Yahoo is attempting to sell off its core business and retain only its main moneymaking proposition: a stake in Chinese e-commerce business Alibaba.
Starboard owns 1.7% of the company, an investment of approximately $570m, Smith wrote. He estimates the value of the company less Alibaba (called the “Yahoo stub” by traders) at near zero.
Smith pointed to “atrocious”, “appalling” financial track record, saying that following the company’s predictions that it would turn around after a notable low point in the third quarter of 2014, “[earnings] actually fell 47% year-over-year”.
The letter marks a new low for relations between Starwood and Yahoo. Yahoo appointed two new directors without Starboard’s approval earlier this month as it prepared for a boardroom battle. “At every step of the way, management and the board have pushed us away,” Starwood said.
Both sides will now begin canvassing supporters ahead of a vote at Yahoo’s annual meeting in June.
“Yahoo today noted Starboard Value LP’s announcement of its intention to nominate nine director candidates for election to Yahoo’s board of directors at the company’s 2016 Annual Meeting of Shareholders,” said a company spokesperson in a press release. “The board’s nominating and governance committee will review Starboard’s proposed director nominees and respond in due course.”
