Billionaire investor Carl Icahn spurred a rally in Yahoo Inc. shares Friday after he disclosed that he had increased his stake in the struggling Internet company.
The company’s stock surged 93 cents, or nearly 9%, to $11.51 in the shortened trading session after Icahn, a Yahoo board member who has been pushing a strategy shift or a sale to Microsoft Corp., said he had bought about 6.8 million shares.
A Securities and Exchange Commission filing showed that Icahn had paid an average of $9.88 a share from Monday through Wednesday, boosting his holdings by about $67 million. The purchases gave Icahn a nearly 5.5% stake in Yahoo, worth about $870 million based on Friday’s closing price.
This is the first time that he has significantly upped his stake in Yahoo. Icahn, who couldn’t be reached for comment, is one of the loudest voices calling for a change in its direction. He and two of his picks became directors in an August settlement that ended a bruising proxy fight.
The activist investor began buying Yahoo shares in the spring while the Sunnyvale, Calif., company was in merger talks with Microsoft. After Yahoo rejected the deal, Icahn tried to oust Chief Executive Jerry Yang and to get the two sides back to the bargaining table. Microsoft Chief Executive Steve Ballmer recently said he was no longer interested in buying Yahoo, though he expressed interest in snapping up its search business.
This month Yang said he would step down as head of the company he co-founded as soon as his successor was determined. So Icahn’s stock purchases are likely to fuel speculation over the status of Yahoo’s search for a new CEO. The board has begun to interview potential candidates.
This year Icahn bought about 69 million shares of Yahoo for an average of about $25 a share. Motley Fool analyst Rick Munarriz said Icahn was trying to recover from a nearly $1-billion loss on that investment.
“It makes perfect sense: At this price, Yahoo is ridiculously low,” Munarriz said. “He’s trying to correct his mistake at this point.”
The market will pay heed, Munarriz added.
“Now he knows the company from the inside,” he said.
“If he’s spending more money, it’s an encouraging sign for Yahoo investors.”