Activist investor Dan Loeb and two other directors nominated by his hedge fund are leaving Yahoo's board after big gains in the Internet company's stock price over the past year.
Yahoo is also buying back 40 million shares of its common stock from Third Point LLC, Loeb's hedge fund. That cuts Loeb's stake in Yahoo from 5.8% to less than 2%.
Loeb instigated the departure of former Yahoo CEO Scott Thompson in 2012 by revealing that Thompson did not have a computer science degree, as Yahoo had previously stated. He left that May as Loeb and his two allies were named to Yahoo's board. Longtime Google executive Marissa Mayer became CEO two months later.
The stock had risen about 83% since then on stock repurchases and earnings growth stemming from its stake in Chinese Internet company Alibaba. Shares slid more than 4% Monday morning.
Yahoo is spending $1.16 billion to buy Third Point's stock. It's paying $29.11 per share, Friday's closing price. It will pay cash.
Yahoo said it will have about $700 million remaining under an existing $5 billion buyback announced last year. The Sunnyvale, California, company said it plans to continue making repurchases under that plan.
Loeb's allies, turnaround specialist Harry Wilson and former MTV executive Michael Wolf, will also be leaving Yahoo's board, which will then have seven directors. PayPal co-founder Max Levchin, who was named a board member upon mutual agreement between the board and Third Point, will continue in his post. Yahoo said that the remaining directors will take a look at the board's size and composition. It did not say when, or if, any other board changes would be made.
Shares of Yahoo fell $1.22 to $27.89 in Monday morning trading. Shares hit a 5-year high of $29.83 on Thursday. The company on Tuesday reported that its second-quarter profit rose 46% to $331 million, while net revenue declined 1% to $1.07 billion. Yahoo is losing ground to rivals Google Inc. and Facebook Inc. in the online advertising market that generates most of their revenue.