Icahn Down $120 Million on Yahoo (YHOO) Bet: Cut Losses or Double Down?

Carl Icahn has so far been silent about the clubbing he took yesterday. We don’t imagine he’ll be silent long. But in any event: If Carl hasn’t dumped any of his 59 million shares, we estimate that he’s now down about $120 million.

So, what’s he going to do?

Yahoo’s now a compelling value play in our opinion–trading at about 10X 2009E EBITDA. But Carl’s not a “value” player. He’s an event player. And the big event that he was betting on has just gone “poof.”

We expect to hear some quality Carl jawboning today, ripping Yahoo a new one for passing on this latest Microsoft deal (smart), as well as for blowing the original Microsoft deal (mistake). But Yahoo is actually following exactly the same “plan” that Carl Icahn just laid out:

  • Try to sell to Microsoft for $34 (Yahoo actually informally offered to sell for $33; Microsoft said “no”)
  • If Microsoft says “no,” do a deal with Google (Done)

Yes, Carl also wants to get Jerry fired, but he hasn’t yet articulated what the Jerry replacement would do that Jerry isn’t.

We doubt that Carl will be quick to take his losses, but we don’t see an easy route for him to make money. We also think it’s even less likely now that he’ll win the proxy fight. Worse, if Yahoo’s business continues to see cyclical weakness (we’ve heard reports of a hiring freeze), Carl’s losses will likely grow in the next few months, and a long-term Yahoo recovery could take a year or more. Not a pretty picture.

So, what’s your next move, Carl?

See Also
Carl Icahn’s Weak “Plan” For Yahoo
Icahn Up $120+ Million on Yahoo Bet

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