Yahoo Investor Canyon Capital Says One Year Is Too Long to Wait

The company said that it would, instead, look at creating a separate company to hold the rest of its assets, in a strategy it is calling a “reverse spin” of its original plan.

The decision marked a U-turn on a previous plan to spin off Yahoo’s vast holdings in e-commerce giant Alibaba, which could have exposed it to a huge tax bill.

Yahoo has warned the spinoff could take more than a year to complete, a time frame that Canyon Capital called “simply unacceptable” after Yahoo spent most of this year preparing to break off its $31 billion stake in China’s Alibaba Group in an attempt to avoid paying taxes on the gains from its initial investment of $1 billion.

FILE – In this Tuesday, June 17, 2014, file photo, Yahoo CEO Marissa Mayer attends the Cannes Lions 2014, 61st International Advertising Festival in Cannes, France.

Mayer also sponsored Davos, a big conference in Switzerland, and flew herself and a few executives there on NetJets for a total cost of $1-2 million, Jackson estimates.

Yahoo is facing more pressure from two shareholders that want the company to pursue other alternatives besides a complex spinoff of its Internet operations. The Los Angeles investment firm is one of the top 15 largest shareholders in Yahoo. To really send a message that the era of Mayer is over, he is also pushing for Yahoo to revert to its old logo.

Another Yahoo investor, NY hedge fund SpringOwl Asset Management LLC, is proposing a new plan to slash the company’s workforce by 75%, replace Ms. Mayer with an operations-focused CEO and bring in a strategic partner to help Yahoo navigate the tax issues surrounding its Asian assets.

“I disagree with this notion that Yahoo can’t be fixed”, said SpringOwl Managing Director Eric Jackson. The plan also involves eliminating perks such as free food, selling the company’s iconic headquarters and leasing back only the space it needs.

If she stays on board for another year and a half, Marissa Mayer will make $365 million for five years of work at Yahoo. After engaging with Yahoo for months and imploring Mayer to make changes to boost the company’s value, Starboard said in a November 19 letter that “there has been little evidence of a turnaround” and “recent results are actually moving decidedly in the wrong direction”. With cost cutting and improvements to profitability, he predicts it could eventually be acquired for more than $24 billion.

“We do not understand the board’s continued support of the company’s senior management team, given its track record”, Canyon Capital wrote.

Starboard hasn’t commented publicly on the plan Yahoo unveiled last week, and has not responded to our request for comment.