Yahoo Updates: Board Not Yet Satisfied With Bids, Sued Over Bidding Restrictions

Yahoo’s (NASDAQ:YHOO) board is treading its path very carefully. As the Wall Street Journal reports, the company has requested prospective buyers to provide better terms than what was offered last week. ^[1] Even as the board weighs its options, a Yahoo shareholder has sued the company over the nature of its bidding process, ^[2] claiming that the non-disclosure agreement (NDA) places many restrictions on bidders and is anti-competitive. With both Google (NASDAQ:GOOG) and Facebook edging the company out in search and display advertising, the more Yahoo malingers, the more it and shareholders will suffer.

See our full analysis for Yahoo’s stock here

Mistrust Between Board and Shareholders is the Last Thing Yahoo Wants

While Yahoo’s leadership has been in question for a while, the recent lawsuit points to the more serious question of whether the board (including Jerry Yang) is placing its self-interest before that of shareholders. This is a repeat of the scathing criticism made earlier by Daniel Loeb, a significant stakeholder in the company.

While Yahoo still ponders its path forward, a continuing delay in the process could lead to even more complaints from shareholders, who have pushed for the company to replace its leadership and update its strategy in the past. With reports that employee morale is slipping at Yahoo, ^[3] the company may not have lot of time left before inflicting more damage on a iconic franchise.

We have a price estimate of $17 for Yahoo’s stock, which is around 5% above the current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Wall Street Journal: Yahoo Seeks Better Stake Bids [↩]
2. ZDNet: Yahoo sued over cross-talk bidding provision [↩]
3. Wall Street Journal: Yahoo Battles Brain Drain [↩]