IF YOU’RE a Microsoft (NASDAQ: MSFT) or Yahoo! Inc. (NASDAQ: YHOO) shareholder, you’ve probably heard the news — thanks in no part to the companies’ investor relations departments.
Yes, on February 1, 2008 Microsoft proposed to acquire Yahoo! for $31 per share, apparently comprised of half cash and half Microsoft shares, or something like that. I’m being vague because it’s not that easy to get information from the companies themselves about what is going on.
This weekend, for instance, the media was full of news that Yahoo!’s board of directors will rebuff the offer as too low and make the case for Yahoo! as an independent. This bit of news was kicked off by an article on the Wall Street Journal’s website on Saturday quoting unnamed sources.
Just about every news outlet in the world repeated the news, as you can see from the Google News screenshot below. Yahoo! is finally expected to make some kind of announcement Monday morning.
But if you are a Yahoo! or Microsoft shareholder — or both — you will not find anything to confirm or deny these reports. More to the point, you will find next to nothing about the proposed acquisition if you visit either of the companies’ investor relations websites.
On Yahoo’s IR homepage (screen shot below) there is a news release from Feb. 1 acknowledging that the board has a received a proposal and will be considering it, but that’s it. CEO Jerry Yang’s email to staff, which was filed in an SEC filing on Feb. 6, is not mentioned.
On Microsoft’s IR homepage (screenshot below) there is nothing. The biggest proposed acquisition in the company’s history is not mentioned — at all.
All of this is most odd, particularly as it seems that this deal might well come down to a battle for the hearts and minds of Yahoo!’s shareholders.
If Yahoo!’s board does not accept the current offer or a sweetened one, Microsoft has only one option — to launch a proxy contest. And Microsoft is pressed for time because it can only launch a proxy contest to replace the Yahoo directors at Yahoo’s annual meeting. Nominations must be put forward between mid-February and mid-March for a meeting in July.
So you would think Microsoft would be trying its best to put out as much information as possible and making its propaganda as easy as possible for shareholders to access and consume. You’d be wrong. They’re not communicating this story at all, leaving it to negative pundits like former sell-side Internet analyst Henry Blodget and anonymous employees to lead the debate.
Of course, Yahoo’s IR department is no better. According to the Wall Street Journal’s Kara Swisher, her sources say that Yahoo’s top execs and directors want the company to stay independent.
“To do that, though, Yahoo needs to show its shareholders that it has a long-term and viable plan to revive itself and, more importantly, has the management abilities to execute that plan,” writes Swisher in a blog post.
But if you visit Yahoo!’s IR website, there is nothing there that prominently explains where management sees the company going. There is nothing prominent about any plan, either before the Microsoft bid or after. In fact, it’s not even clear what Yahoo! does or what its shareholders might be selling to Microsoft. Basic stuff inquiring shareholders want to know.
At minimum, both companies should have already set up special areas on their IR websites to consolidate all available information about the proposed deal — news releases, presentations, SEC filings, etc. — in a single convenient location.
Shareholders deserve nothing less, and both companies are remiss in not doing more to communicate with them about the proposed deal. And while the New York Times reports that Microsoft plans to “crisscross the nation to meet with Yahoo’s largest shareholders in an election-style campaign,” this kind of “upstairs” tactic will do nothing to endear the acquisitive company to Yahoo’s many smaller shareholders, including employee shareholders.
As owners, every shareholder no matter how big or small has a legitimate stake in any potential deal. And while institutional investors are vital to the success of Microsoft’s bid, retail investors and smaller institutional investors often can be the swing vote in such transactions.
There’s no excuse for ignoring them.
Now, the companies might argue that the SEC’s archaic proxy and takeover rules prevent them from effectively keeping their shareholders informed about developments. There’s some truth to that, and situations like this certainly show up the rules and the regulators to be out of touch with the reality of the information age.
But there is another, simpler explanation: Microsoft and Yahoo’s investor relations departments are just lousy communicators.