There have been no shortage of activist investors squaring their sights on Yahoo YHOO +1.40% over the last decade, but the latest move by Jeffrey Smith’s Starboard Value is somewhat unique. In a new letter Nov. 19, the hedge fund is urging Yahoo CEO Marissa Mayer and Chairman Maynard Webb to reverse course on their plan to spin off the Internet company’s Alibaba stake.
“The proposed spin-off of Aabaco Holdings is not Yahoo’s best alternative,” Smith wrote in the letter. “Instead, you should be exploring a sale of Yahoo’s core Search and Display advertising businesses and leave ownership stakes in Alibaba Group and Yahoo Japan in the existing corporate entity.”
That marks something of a shift from Smith’s tone earlier this year. Starboard urged Mayer in January to steer the riches from the Alibaba stake to shareholders in the most tax-efficient manner possible. Those comments preceded the late January announcement that Yahoo would indeed pursue a tax-free spinoff of its 15% Alibaba stake, but that plan has gotten more complicated throughout the year with a potential IRS challenge to the transaction rising as a threat.
Smith’s new call, for Yahoo to keep its still-lucrative stakes in Alibaba and Yahoo Japan and sell off its “core” business, is closer to what he initially suggested the company pursue in 2014. At the time, Smith, whose firm owns less than 1% of Yahoo, urged a combination of the company and AOL AOL +% that would “[facilitate] the realization of value from Yahoo’s non-core equity stakes.” AOL was ultimately bought by Verizon in May for $4.4 billion.