Yahoo has entered its second round of bidding, but the offers are not as promising as the company had hoped.
There is much ambiguity surrounding what exactly is for sale and which bids Yahoo is likely to pursue over the course of the next couple of months.
According to CNBC, several bids for Yahoo's core business are upwards of $5 billion. It's uncertain which assets are up for sale. Among the most highly publicized offers is a bid from Verizon Communications. The telecommunications giant has made a bid for over $3.5 billion, which is considered rather small compared to the others.
Orchestrating a spinoff of Yahoo's 15 percent stake in Alibaba, the Chinese e-commerce company, was one of the final attempts to secure a turnaround, but the plan proved unsuccessful in light of investors' fears that such a transaction would result in a multi-billion dollar tax bill. While Yahoo maintained that under existing law they would not be taxed, the fear of adverse market reaction quickly put an end to that strategy. Instead, Yahoo announced it would execute a reverse spin-off, which would see the company sell its core business instead, resulting in two publicly traded companies. Shareholders would be allocated shares from both entities.
Despite Yahoo's acquiescence to Starboard's strategy, the hedge fund remains dissatisfied with what it views as the internet company's half-hearted approach towards engaging with interested companies and securing lucrative bids. Its impatience with the company resulted in Starboard's announcement of a proxy fight to replace all of Yahoo's directors and push out Mayer, according to the New York Times.
At this point, it's clear that both Yahoo and Starboard are on the same page about selling the company's core business, but the two parties are in disagreement over who knows best. Starboard's initiation of a proxy battle means the hedge fund will be kept busy rallying support in anticipation of Yahoo's upcoming shareholder meeting.
While there are definitely prominent investors who are in agreement with Starboard, this proxy fight may do more damage than good during this attempt to rally bids and sell Yahoo. Companies thinking about making a bid may be hesitant to do so in view of the uncertain future of the current board of directors.
Despite their attempts to secure a sale, all reports indicate that Yahoo is struggling to garner the pricier bids it seeks. Yahoo has been in a decade-long decline, experiencing several rapid changes to its leadership. In addition, its attempts to branch out have been thwarted by other tech and social media giants like Facebook and Google.
If the bid from Verizon is any indication, Yahoo is in for a rough next couple of months as it struggles to attract higher bids. The final round of bidding is scheduled to end mid-July.
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