Yahoo is likely to spend hefty amount of money to prevent the wholesale management change
The New York based investment advisor, Starboard Value, has geared up to remove Yahoo’s entire board from power. This will mark to be one of the biggest and the most expensive proxy fights to happen in years.
Although the stockholders of the internet giant are dissatisfied with the board, the proxy fights in opposition to a behemoth like Yahoo are highly rare, on top of it, achieving a full board’s replacement is rarer. Moreover, winning a proxy fight isn’t piece of cake –it might cost millions on companies as they have to spend on solicitation firms, lawyers, and other costs which might include mailing to shareholders.
According to the general notion, the companies spend a few million on a “single proxy fight” but the Sunnyvale, Calif. firm is highly likely to spend few more millions in order to prevent the wholesale management change. According to FactSet data earlier analysis, the costs pertaining to the proxy fight is directly proportional to the company’s market capitalization at the time of the campaign. Therefore, the higher the market cap of the company, the more price it has to bear.
Therefore, if the relationship between the two components – market capitalization and cost of proxy fight – as per the historical data has authenticity, then the $36 billion organization is likely to spend around $6.2 million as the proxy solicitor fees and other costs. This is not a huge sum of money for the company who generate around $5 billion revenue however spending ample amount of money as solicitor fees is not favorable option for the companies either.
According to the data compiled by CNBC.com and an analysis from ValueWalk, the protestors of the case are likely to spend considerably less in a proxy fight in comparison with the company who has been attacked. According to the FactSet database, if for the last decade the companies, on average, have paid $1.5 million, then the dissident groups have paid slightly over $700,000.
This could be the outcome of the incentives being in front of the investor who want to make the maximum profit out of the deal while, on the other hand, the management only want to have firm control of the company.
According to FactSet data, for Yahoo, things aren’t like this and there is not some relationship between the outcome of the proxy fight and the money spent on it.
Overall, there have been very few cases, which resulted in complete win against the Yahoo’s size entities. Activists generally use such ways to get a part of a settlement or concession or a split.
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