Daniel Loeb’s New York-based Third Point LLC, has made almost $122 million so far on its stake in Yahoo! Inc. (YHOO) after successfully forcing Chief Executive Officer Scott Thompson to step down.
Loeb, 50, whose hedge fund owns 5.8 percent of the Web portal, has been pushing to shake up its board since September 2011, when he told the company that directors had erred in spurning a takeover bid from Microsoft Corp. Yahoo rose the most in three weeks yesterday following Thompson’s decision to leave, after Loeb flagged discrepancies in the CEO’s resume.
“We are confident this board will benefit from shareholder representation, and we are committed to working with new leadership to unlock Yahoo’s significant potential and value,” Loeb, who will join the board, said in a statement after Thompson’s departure.
While the proxy fight with Yahoo has grabbed headlines, Loeb, a former distressed debt analyst, has staged few such battles with management in recent years. Instead, most of his returns have come from buying distressed assets and companies going through restructurings or mergers. The $9 billion hedge fund, a so-called event and special situations fund, has returned 7 percent this year through May 2, with much of it coming from credit markets, said a person familiar with the fund who asked not to be named because the information is private.
About 20 percent of the portfolio is in mortgages, primarily on residential properties, Loeb said at the Skybridge Alternatives Conference last week in Las Vegas.
Mortgages have been a good place to make money this year. Returns on subprime-mortgage bonds issued in 2005 through 2007, the years with the worst loans, for example, have averaged 11 percent this year through May 10, according to Barclays Plc index data.
Loeb also owns Portuguese debt, saying the country isn’t in as much danger of default as Greece or Spain. A Bloomberg index of 7 to 10-year Portuguese government bonds has returned 22 percent this year.
In the first quarter one of his bigger winners was in Norway’s Eksportfinans ASA. Third Point bought about $500 million worth of its bonds after dispatching an analyst to Oslo on Thanksgiving, just days after the lender’s debt was cut to junk by Moody’s Investors Service. By the end of March, the yield on Eksportfinans’ $1.5 billion of 3 percent notes due 2014 had fallen to 4.2 percent from 10.3 percent in December.
Third Point spent about $971 million on its stake Sunnyvale, California-based Yahoo, including shares and options, for an average price of $13.77 per share, according to Securities and Exchange Commission filings. The stock rose 2 percent to $15.50 a share at 4 p.m. in New York. In 2008, Microsoft offered as much as $33 a share for Yahoo!
Loeb won after showing Thompson claimed to have a degree in computer science from Stonehill College on the company’s website. In filings from EBay Inc. (EBAY), his previous employer, his degree is correctly listed as accounting.
As part of Loeb’s agreement with Yahoo! to drop his proxy fight, Loeb will become a director along with two Third Point nominees, Harry Wilson and Michael Wolf. Loeb generally doesn’t join boards because they are time-consuming and limit his ability to trade the stock. Yahoo! will be his first directorship since 2008.
Ross Levinsohn, Yahoo’s head of global media, was named interim CEO, and director Fred Amoroso will become chairman. Amoroso replaces Roy Bostock, the non-executive chairman, who is exiting the board immediately.
Loeb founded Third Point after stints as distressed debt analyst at Jefferies & Co. and a high-yield bond salesman at Citigroup.
Third Point’s main fund has returned 17.4 percent on average since it started in November 1996, compared with about 9 percent for an index of similar funds tracked by Chicago-based Hedge Fund Research Inc.