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Hedge Fund Manager Criticizes Yahoo for Wasting $3 Billion On Poor Acquisitions (businessinsider.com)

Posted by samzenpus on from the bad-choices dept.

mrspoonsi writes: On Monday morning, Eric Jackson, manager of hedge fund SpringOwl, sent a brutal 99-page presentation to Yahoo's board, outlining his case for why the company should drop Marissa Mayer as CEO and find new management. Jackson points out that Yahoo has burned through $3 billion on M&A in the past three years since Mayer took the reins, which contributes to $10 billion in what Jackson calls Yahoo's misallocated capital. The value of all of those startups Yahoo has acquired, Jackson says, is worth nothing at Yahoo's current stock price. Jackson also points out that Yahoo has a history of buying up startups run by former Google APM members. While at Google, Mayer started the company's elite associate product-manager program. Of the 49 acquisitions Yahoo has made under Mayer's leadership, six were startups founded by ex-Googlers. The total cost of these six acquisitions is $319 million, according to Jackson's slide deck. Yahoo bought Polyvore in July for $230 million. Polyvore, a social commerce site that lets users make artistic collages of clothes and accessories...But Jackson does not mince words when it comes to Yahoo's decision to spend shareholder money acquiring Polyvore and companies like it. "It's not acceptable to pay $230M for zombie companies run by former APM members," he says, pointing out that Polyvore had raised $22 million in VC funding, was 8 years old, and had gone through multiple pivots. For all intents and purposes, it looked like a goner until Yahoo bought it.

4 of 159 comments (clear)

  1. Merger and Acquisitions by CastrTroy · · Score: 5, Informative

    In case anybody is wondering M&A stands for Mergers and Acquisitions.

    --

    Anthropic principle: We see the universe the way it is because if it were different we would not be here to see it.
    1. Re:Merger and Acquisitions by Darinbob · · Score: 5, Interesting

      I was at a company once where every time it was announced we were considering a merger, the stock price went up. When the merger when through, the stock price went up again. The VP of Acquisitions eventually became the CEO. The stock got up to unreasonable levels, at which point they announced considering an acquisition and an analyst said "hmm, I wonder if that's a good idea" and the stock plummed by half over the next two days. It was an industry leader though, it went through the dotcom boom and bust six months before of other companies.

      But anyway, Mergers and Acquisitions has often been seen as a way to make money. And Yahoo did make money this way. They did almost too well with Alibaba which is worth more than Yahoo now (which raises tricky legal concerns about who owns who). The problem is falling into the trap of thinking mergers by itself is a good idea. Just because Google can buy useless companies by paying 100 times their estimated value does not mean everyone should follow suit.

  2. Re:What the $&@! are M&A? by Anonymous Coward · · Score: 5, Informative

    Mergers and Acquisitions.

  3. Re:Did Yahoo EVER make money? by ShanghaiBill · · Score: 5, Interesting

    I remember back around Y2K they were burning through capital and had zero profits to show.

    Yahoo was an early investor in Alibaba. They have made billions and billions off of that investment. Other than that, they have not done much.