Christian Leone’s Luxor Capital adds a new position in Yahoo

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Nov. 20 2020, Updated 1:23 p.m. ET

Luxor Capital adds a new position in Yahoo

Christian Leone’s Luxor Capital’s top new positions for the quarter ending in June were Melco Crown Entertainment (MPEL), Yahoo Inc. (YHOO), and Constellation Brands, Inc. (STZ). Luxor’s 13G and 13D filings since July revealed new positions in Orbitz Worldwide, Inc. (OWW), Overseas Shipholding Group (OSGB), and Eclipse Resources Corp. (ECR). The fund raised its stakes in RCS Capital (RCAP), BJ’s Restaurants (BJRI), and Altisource Portfolio Solutions S.A. (ASPS), and took activist positions in Altisource Asset Management Corp. (AAMC) and Conn’s, Inc. (CONN).

Luxor Capital added a new position in Yahoo (YHOO) in the quarter ending in June. The stock accounted for 3.86% of the fund’s 2Q14 portfolio.

Overview of Yahoo

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Yahoo! Inc., together with its consolidated subsidiaries, is a global technology company that provides a variety of products and services, many of them personalized, including search, content, and communications tools on the web and on mobile devices. The company earns revenue primarily by advertising to its 800 million monthly users through various products and platforms.

As discussed earlier in Market Realist’s series on Internet industry’s 3Q 2014 earnings during the third quarter, Alibaba’s (BABA) initial public offering (or IPO) dominated the media headlines as it became the biggest IPO in the world at $25 billion. Yahoo, which had a stake of 23% in Alibaba before the IPO, sold 122 million shares of Alibaba and saw an after-tax windfall of $5.1 billion.

Yahoo faces activist investor Starboard Value

Last month, activist investor Starboard Value sent a letter to Yahoo’s CEO, Marissa Mayer, asking her to consider acquiring AOL (AOL) with the remaining cash balance. The rationale that Starboard gave Yahoo was that a combined entity of Yahoo and AOL could better challenge Google (GOOG) (GOOGL) and Facebook’s (FB) dominance in the digital advertising market.

Analysts believe such a merger could create synergies in video and content, but that it would still be a slow-growing entity. The fund also suggested the merger could result in “monetization of Yahoo’s non-core minority equity investments in a tax-efficient manner.” The fund hinted at a potential separation of Yahoo core and non-core businesses to unlock value.

Third quarter revenue and earnings beat estimates

Recently, Yahoo shares went higher after third quarter earnings and revenue beat analyst estimates. Third quarter profit rose to $6.77 billion, helped by a $6.3 billion gain from the sale of its stake in Alibaba Group. GAAP (generally accepted accounting principles) net earnings per diluted share was $6.70 compared to $0.28 in the third quarter of 2013.

GAAP revenue was up 1% to $1.14 billion for the third quarter of 2014. Mayer noted that, “We achieved this revenue growth through strong growth in our new areas of investment mobile, social, native and video – despite industry headwinds in some of our large, legacy businesses.”

The next part of this series will focus on Luxor’s new position in Constellation Brands.

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