Yahoo’s Jerry Yang: Oops, My Bad

Yahoo! Inc. (NasdaqGS: YHOO) has seen better days. The same could be said for the company’s Chief Executive Officer, Jerry Yang, who is facing serious legal battles after a bid from Microsoft (NasdaqGS: MSFT) was retracted. Mr. Yang has gone from Chief Executive Officer to Chief Damage Control Officer.

The deal, which Microsoft had raised considerably to satisfy Yahoo! shareholders, was pulled primarily because Yahoo! wanted it their way, or no way at all. Yahoo! continually rejected Microsoft offers that fell short of the $37+ price per share buyout that Yahoo! felt it deserved.

The Yahoo! shareholders have launched a series of class action lawsuits on the grounds that Yahoo! breached its fiduciary duty to its shareholders. And rightly so. Yahoo! shareholders should be up in arms over the way this potential transaction was handled. Before Microsoft came along, Yahoo! shares had been trading in the sub-$20 region with very little hope for a turn-around. When Microsoft came in, shares leapt nearly 60% to nearly $30 per share. In fact, Microsoft ended up saying they would pay as much as 70% more than what Yahoo! shares were trading at before Microsoft came in. That’s quite generous.

Since Mr. Yang decided that wasn’t enough, shares have fallen 15% and will likely go back to trading in the sub-$20 range. Talk about destroying shareholder value.

After catching wind of shareholder unrest, Mr. Yang came out today and claimed that they were still open to negotiations when Microsoft pulled their bid. Mr. Yang, just so you know, taking a hard-line to getting only what you want is not a negotiation; it is a demand. I’m not surprised that Microsoft pulled its bid. Why would they pay more than what they think the company is worth?

I know that all the Yahoo! bulls will come out and say the deal with Google (NasdaqGS:GOOG) and a good quarter first quarter should boost the valuation. I agree. It did boost the value - Microsoft raised it’s bid. Let’s face it, the quarter was good, yes, but it wasn’t astounding. The deal with Google is also promising, but it has not been sealed in stone yet.

If I was a Yahoo! investor, which I am not, I would be first in line to file a lawsuit. The shareholders were victims of the Yahoo! leadership’s ego, plain and simple. Good luck Yahoo! shareholders, the way this was handled is absolutely absurd.

Freund Investing Managing Member Ryan Freund holds no position in any of the companies mentioned in this article. Freund Investing has a solid Disclosure Policy.