Marissa Mayer blames short-sighted activist investors for causing Yahoo to lose out on tens of billions of dollars of upside by selling Alibaba stake

  • In her first interview since leaving Yahoo, Marissa Mayer said selling the company’s stake in Alibaba was a mistake.
  • Mayer blamed shortsighted activist investors for pressuring the company to do the deal.
  • Yahoo sold half of its 40% stake in Alibaba for $US7.6 billion in 2012. Yahoo obtained the entire stake for $US1 billion in 2005.

Before Yahoo was swallowed up by Verizon, it was a struggling internet company led by CEO Marissa Mayer, trying to bring back its glory days.

Mayer never succeeded in revitalizing Yahoo. But one of her main legacies was selling a portion of Yahoo’s stake in Chinese internet giant Alibaba, giving back billions of dollars in returns to Yahoo investors.

And according to Mayer, it was a huge mistake.

In her first interview since leaving Yahoo, Mayer told The New York Times that selling the stake in Alibaba was a “tragic” mistake that eroded “tens of billions of dollars of upside.”

“Sometimes that shortsightedness of wanting to get a return quickly can cause you to miss a much bigger gain,” Mayer said, singling out activist investors Carl Icahn and Dan Loeb as among the primary culprits that pressured the company to sell.

Yahoo paid $US1 billion for a 40% stake in Alibaba back in 2005 in a deal brokered by Yahoo cofounder Jerry Yang and Alibaba founder Jack Ma. As Alibaba became an ecommerce giant in China, the value of Yahoo’s stake swelled.

Soon Yahoo’s stake in Alibaba was worth much more than Yahoo’s actual operating business – and it attracted the attention of numerous investors looking for ways to “unlock” the value of the holdings.

Yahoo sold half of the stake back to Alibaba in 2012 for $US7.6 billion in a deal that had been arranged a few months before Mayer became CEO. That sale was the culmination of a proxy battle between Yahoo and activist investor Dan Loeb, who managed to force out the previous Yahoo CEO.

Two curious culprits

But Mayer’s choice of culprits is curious. Loeb, of the hedge fund Third Point, hired Mayer for the CEO job. So presumably the two would have been on the same page about selling Alibaba.

And it’s not entirely clear why Mayer blames Icahn. Although Icahn was involved in an earlier proxy battle with Yahoo, in 2008, that fight was primarily about whether Yahoo should sell its search business to Microsoft (a controversial deal that Carol Bartz, another previous Yahoo CEO, saw through).

Here are Mayer’s comments on Alibaba, as told to The New York Times’ David Gelles:

“One of the more tragic cases of Yahoo is the Alibaba stake. Both Carl Icahn’s campaign and some of the people who were part of Dan Loeb’s campaign really wanted a commitment to see that stake sold. And Yahoo sold half of that stake in a $US35 billion market cap for Alibaba, eroding tens of billions of dollars of upside. So certainly that was not positive. Sometimes that shortsightedness of wanting to get a return quickly can cause you to miss a much bigger gain.”

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