Morning Commentary: Yahoo! convertible bonds steady, equity softens as investor picks proxy fight

By Stephanie N. Rotondo

Seattle, March 24 – Yahoo! Inc.’s $1.25 billion of 0% convertible notes due 2018 were holding their ground in early Thursday trading, even as its stock was getting pressured.

A market source saw the notes trading with a 97 handle. The stock (Nasdaq: YHOO) meantime dipped 26 cents to $34.53.

The equity move came as the company’s activist investor, Starboard Value, sent the web company a letter stating that it intended to try to remove Yahoo!’s entire board of directors and replace it with nine new members.

Starboard, which holds a 1.7% stake in Yahoo!, said that it was “extremely disappointed with Yahoo’s dismal financial performance, poor management execution, egregious compensation and hiring practices, and general lack of accountability and oversight by the board. We believe the board clearly lacks the leadership, objectivity, and perspective needed to make decisions that are in the best interests of shareholders.”

Yahoo! has already been looking into its strategic options as it struggles to regain its place among internet companies. The company is reportedly considering Starboard’s proposal, but chatter is that a proxy fight is more than likely.

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