YHOO – Machiavellian or Failed Negotiation

YHOO – the hiring of the new CEO is either a brilliant negotiating ploy or the end of the auction process.  As to the former, first assume that the BOD and potential acquirers were far apart in price – perhaps $0.50 – 1.00/share which would equate to $600 mm to $1.2 billion.   At EBAY, Scott Thompson received $960,000 in cash compensation in 2010 with stock and option awards bringing his total compensation to $10,436,593, making him the 2nd highest compensated employee and providing a nice jump in comp from his average of $2.9 mm in 2008 and 2009.  Now, YHOO’s BOD sends a message to potential acquirers “your price is way too low, we’re moving ahead with the company as a standalone entity and have just hired a kick-ass CEO.”   Not many candidates in a strong current position would switch to a company in the midst of a potential takeover, abetted by an activist shareholder base.  But Thompson is 53 and assuming he receives a monster pay package with a boatload of options that vest upon a change of control or sale of substantial assets, he would be a great stalking horse for YHOO.  Whether they paid him $50 or 100mm, a substantial closing of the price gap in negotiations would still net YHOO shareholders a much better price  Thompson then does what every other former tech CEO does, becomes a VC investor.

I have no position in YHOO.


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