Yahoo! convertibles steady, equity softens as investor picks proxy fight; oil names lower

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 meantime gyrated throughout the day, falling as low as $33.93 but eventually ending up 6 cents at $34.86.

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.

Oil convertibles down

Away from Yahoo!, domestic crude oil was trading under the $40-mark for the second day, even as Baker Hughes reported that active U.S. drill rigs fell by 15 last week. That news did little to ease concerns of a supply glut after Wednesday’s report from the U.S. Energy Information Administration showed a crude inventory build of 9.4 million barrels last week.

That was about three times more than what analysts polled by Reuters had forecast.

In response to the news, convertibles linked to Chesapeake Energy Corp. and Whiting Petroleum Corp. were weaker, even as the stocks improved.

Chesapeake’s 2.5% convertible notes due 2037 traded down to 63.25, which compared to previous levels in the low 70s, a source reported. Whiting’s 1.25% convertible notes due 2020 dipped about half a point to 58.5.

As for the equities, Chesapeake rallied 12 cents, or 2.91%, to $4.25, as Whiting improved 36 cents, or 5.01%, to $7.54.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Whiting Petroleum Corp. NYSE: WLL

Yahoo! Inc. Nasdaq: YHOO

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