Yahoo! co-founders dumping shares

Yahoo! shareholders should be happy that Yang & company are selling their positions.

By InvestorPlace Feb 12, 2010 10:15AM
It is normally not well received to see a founder sell shares.  But in the case of Yahoo! (YHOO), that might not be the case. 

Yahoo! submitted a filing on Thursday evening disclosing that Jerry Yang, co-founder, filed to sell 3 million shares of common stock.  David Filo, also a co-founder, made the same insider sale filing to sell up to 2 million shares. 

After the Microsoft (MSFT) buyout was rebuffed and botched by Jerry Yang in the manner that it was, shareholders should not be upset that Yang or Filo are selling.  They should instead cheer and ask at least Jerry Yang to unload the rest of his shares, much in the same way Yahoo finally unloaded HotJobs for a $220 million loss.

Yang's shares are being sold by a trustee, and the trust the shares were transferred into is set to terminate by December 31, 2010.  Filo's shares will sell on a prearranged trading schedule over a 12-month period that starts this May, on the open market at market price.

At first a filing showed that Yang had 54.1 million combined trust shares of Yahoo! for about a 3.9% stake, but that was as of April 2009. At the same time, David Filo's combined stake was listed as about 79.9 million shares for a 5.7% stake.

Here is the issue. Jerry Yang made such a mess of the Yahoo! acquisition by Microsoft (MSFT) that the company could probably make an exception for an early termination to any remaining lock-up expiration and ask Yang to sell the rest of his shares. Of course that cannot be forced, but it might actually be a good situation. The market would sell Yahoo! lower as it absorbed shares, but this would be the one clear and final break. 

This is definitely not the normal strategy you would expect to hear. In the case of Yahoo!, it would certainly be viewed differently than if Microsoft told Bill Gates that he could unload all of his shares.

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