By Jonathan Chen, Benzinga

Yahoo's (YHOO) board may have screwed up again.

Rumors surfaced last week that instead of selling itself, the company was mulling a share buyback and dividend to appease investors. Benzinga spoke to Yahoo about the rumors, only to be told the company would not comment.

Yahoo instead veered in another direction, announcing Tuesday it was buying InterClick (ICLK) for $9 per share. The stock plunged 10% on the news but had recovered to a loss of 5% at midday.

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There are rumors that the company may sell its Asian assets, including Yahoo Japan and its 39% stake in Chinese Internet giant Alibaba, instead of going private. If this is true, then the Yahoo board of directors, as said first by hedge fund manager Dan Loeb, is a bunch of clowns.

This kind of egregious mistake means the board of directors needs to be replaced entirely, including company co-founder Jerry Yang. Yang said recently that Yahoo has other options to a sale, including the tax-free sale of its Asian assets.

The board's ultimate responsibility is to shareholders, and it has screwed up twice in three years. First it made the mistake of not selling out to Microsoft (MSFT) for $33 per share in 2008. (Microsoft owns and publishes Top Stocks, an MSN Money site.)

Yang and the rest of the board wanted more money from Redmond. When the financial crisis started, the share price dropped into the low single digits and never came close to reaching the Microsoft offer.

Alibaba chief executive Jack Ma has expressed interest in buying Yahoo, but because of political problems, that may not happen. The board's job is to maximize shareholder value, but it has not done this at all.

The board made the right decision by firing chief executive Carol Bartz, but finding a replacement has taken much longer than expected. It seems the lights have never gone on in Sunnyvale, and nobody bothered to tell them they are in the dark.

Loeb, the hedge fund manager who has bought a significant stake in Yahoo, still has some time to agitate Yahoo's board and do what he can to try to maximize shareholder value.

Better get to work.

ACTION ITEMS:

Bullish
Traders who believe that Loeb can somehow get something done before the board screws up again might want to consider the following trades:

• Loeb believes shares are worth $19 to $31. If his calculations are right, there is significant upside in Yahoo shares from current levels. Investors may want to take a stab now, with Bartz gone and Loeb in. However, something needs to be done about the board. Perhaps Loeb can get a seat.

Bearish
Traders who believe that Loeb will fail may consider alternate positions:

• Yes Loeb does understand technology, but why would he succeed where others have failed before? If the board does not resign (and shareholders continue to vote for them), nothing will change. Yes, the company is actively shopping itself, but there is the chance that Yahoo's board errors on this decision as well. Traders may want to short or buy puts if they believe this. 

Neither Benzinga nor its staff offer investment advice, nor do they recommend that you buy, sell, or hold any security.

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