The Activist Investor: Boot Yahoo!'s Board

These were the actions of a board that didn't want to sell the company to Microsoft. These were the actions of a board that was embarrassed by the fact that Yahoo! had reportedly passed on a $41/share offer from Microsoft in the spring of 2007. They didn't come to $41 after a careful analysis of what the company was worth today. They simply wanted to avoid the stigma of accepting anything less than what they previously may have passed up.

They thought they could play tough with the rich guy from Redmond. They can afford $41 a share, the thinking likely went, so why not hold out for it?

They played chicken with our (the shareholders') money and lost. When Microsoft walked, they were caught red-faced with no explanation that will pacify shareholders.

What was more galling for shareholders was to read a report in The New York Times that there were high-fives all around the Yahoo! executive offices in Sunnyvale on Saturday night. (Jerry Yang has said since that this didn't happen, although reporter Miguel Helft is a professional. It's hard to imagine he'd make that detail up.)

But what has stuck in the craw most of all for Yahoo!'s shareholders is Chaiman Roy Bostock's post-deal statement Saturday that "From the beginning of this process, our independent board and our management have been steadfast in our belief that Microsoft's offer undervalued the company and we are pleased that so many of our shareholders joined us in expressing that view."

Rather than react directly, I will simply repeat the comment from respected investor Gordon Crawford of Capital Research -- the largest holder of Yahoo! stock with 16% of the shares:

"I would love to know who these shareholders are. It's none of the ones that I talked to today. Everybody I talked to would have sold their stock at $34."