Shares of Yahoo slipped nearly 7 percent in early Monday trading as services reported management may reward shareholders with a special dividend. Many had been hoping for a sale.
Yahoo shares fell to $15.53 down $1.04 cents, early Monday, after reports the Sunnyvale, Calif.-based search engine and media company would declare a special dividend, using some of its $2.87 billion in cash, plus whatever it might receive from selling holdings in other companies.
Investors had bid up Yahoo shares nearly 30 percent in the nearly two months since CEO Carol Bartz was fired Sept. 5. Third Point Capital, the hedge fund led by New York investor Daniel Loeb, took a 5 percent stake and said it planned to invest more because Yahoo had great value.
Yahoo's market capitalization fell to $18.6 billion and its enterprise value is $18.8 billion.
That size has perhaps frightened away potential acquirers such as Microsoft or Walt Disney Co., as well as private equity groupls like Silver Lake or Providence Equity Partners that invest in media companies.
Bloomberg, citing insiders, said management now favors selling assets, such as its 40 percent stake in China's Alibaba Group and other holdings, then pay off shareholders with a special dividend. Co-founder Jerry Yang, a former Yahoo CEO, was cited as saying he preferred a special dividend.
Another option could be spinning off Yahoo's Asian assets including the Alibaba stake as well as holdings in Yahoo Japan into a separate company, which might avoid tax consequences, the Wall Street Journal Asia reported. Yahoo has acknowledged hiring Goldman Sachs, which managed its 1995 IPO, as well as Allen & Co., for strategic advice.