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Third Point's Loeb Lobs Another Salvo at Yahoo's Thompson

NEW YORK ( TheStreet) -- Yahoo (YHOO - Get Report) has become less of an Internet company and more like a soap opera. Third Point's Dan Loeb added more drama, again calling for CEO Scott Thompson's head as the proxy battle between Yahoo and hedge fund firm Third Point, its largest shareholder, goes on.

Loeb released another letter today, asking that Thompson be fired following the disclosure that his education background was not what it seemed. "It appears very clear to us -- and to many corporate governance experts, Yahoo employees, and fellow Yahoo shareholders -- that Mr. Thompson's fantasy degree was in no way an 'inadvertent error.' The evidence shows he had been using false credentials for years. Mr. Thompson's 'apology' was clearly insufficient and it seems that the only thing he actually regrets is that he has been caught in a lie and publicly exposed," Loeb wrote in the letter.

This comes just a day after Sunnyvale, Calif.-based Yahoo said it was going to form a committee (which is costly) to look into Thompson's background. Yahoo also disclosed that the board member who led the search committee to find Thompson, Patti Hart, would not stand for reelection to the board.

The situation surrounding Yahoo has become a nightmare following Third Point's revelation that Thompson may have lied on his resume. In the past week, shares of Yahoo have fallen 3%, and investors are growing tired of the drama. Eric Jackson, president and co-founder of Ironfire Capital, says Thompson must be ousted at the Silicon Valley Internet company. "He's lost the trust of his people. You can't lead if you have no followers. He's become a sideshow. He must go now," Jackson said to me via Twitter. Jackson owns Yahoo shares.

Discrepancies with Thompson's resume harken back to his days at eBay (EBAY), where he was president of PayPal. EBay CEO John Donahoe has come out in support of Thompson amid the controversy. "I think Scott Thompson did a great job at PayPal. I think he's a very talented leader, and I believe he can help Yahoo. I hope they get through this and he can continue to do the very challenging job he's got of helping to turn Yahoo around. I'm Scott's biggest fan," Donahoe said to reporters in Tokyo, according to Bloomberg.

It remains to be seen what will ultimately come of Yahoo and Thompson's fate, but the longer the process drags on, the bleaker the story gets. It's not always sunny in Sunnyvale these days, that's for sure.

Yahoo could not be immediately reached for comment.

Shares of Yahoo are lower this morning, off 0.4% to $15.22.

Interested in more on Yahoo!? See TheStreet Ratings' report card for this stock.

Check out our new tech blog, Tech Trends. Follow TheStreet Tech on your wireless devices.

-- Written by Chris Ciaccia in New York

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