Yahoo! Inc. (YHOO)’s Core Business is in Trouble; Stock Could Double with Alibaba IPO


Eric Jackson, a Yahoo! Inc. (NASDAQ:YHOO) shareholder and Ironfire Capital founder & managing partner, discussed during today’s CNBC’s Squawk Alley Yahoo! Inc. (NASDAQ:YHOO)’s CEO Marissa Mayer role in Yahoo! Inc. (NASDAQ:YHOO)’s price rise in the past two years since she took over as a CEO.

CNBC’s Jon Fortt asked Jackson to confirm that he, like many others, argues that the “rise in Yahoo! Inc. (NASDAQ:YHOO)’s price is due to Alibaba, and not due to Yahoo! Inc. (NASDAQ:YHOO)’s core business”, and asked him if he thought Yahoo! Inc. (NASDAQ:YHOO) was undervalued. Jackson said that the stock is “certainly undervalued”, adding that it’s the reason why he’s still a shareholder. He says that if Mayer makes smart moves with the coming Alibaba cash, and does not make any billion dollar Tumblr-moves, which destroy shareholder value, that he can see the share price possibly even double from its current level of $35 a share in the near term.

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He accused Mayer of dramatically devaluing Yahoo! Inc. (NASDAQ:YHOO)’s core business.

“[…] After two years, it’s really not questionable that this core business is in a downward spiral, and it is certainly valued almost close to 0 today. Some would say, when you look at the possible tax-savings of what Alibaba or SoftBank would pay for Yahoo! Inc. (NASDAQ:YHOO), it’s worth even far less than 0 at the current price. That reflects on Marissa, certainly,” Eric Jackson said.

Jon Steinberg then asked him if Mayer’s buying stock instead of selling it would alleviate his concerns and at what level should she be buying in his opinion.

Jackson said that he calculated that the total compensation package she will be getting for five years of serving as CEO of Yahoo! Inc. (NASDAQ:YHOO) will bring her $265 million, if the stock price does not move anywhere from where it is today. He pointed to an example of a CEO buying $1 million of shares of his company after a stock price decline, and suggested that he would like to see her buying stocks worth at least 10% of what she earned in her first year of service, when she made $155 million, and added that she certainly should not be selling stocks.

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