Shares sold short in Yahoo! Inc. (NASDAQ: YHOO) dropped by 9.3 million shares to 54.5 million for the period that ended March 15. To some extent, the retreat was symbolic, because daily trading averages 15.2 million shares. However, the drop did happen just ahead of a proxy war between Yahoo and hedge fund Starboard Value, which means to replace the entire board.
Despite trouble with revenue at its core business, and confusion about what it might do with its Asia assets in Alibaba and Yahoo! Japan, shares have rumbled higher by 11% in the past month. Presumably, Wall Street expected pressure on its board to drive further restructuring of its portal operation, or a resolution to the future of those huge non-core assets. In the meantime, Yahoo management and its board simply want to make it through the annual meeting with the slate reelected and another year to show investors that they will be rewarded.
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Yahoo is in many ways a short seller’s dream. The level of drama around the company drives frequent swings in the price of its shares, volume spikes and rumors about board deliberations. Yahoo’s share price has dropped 22% in the last year, but it was down 40% just weeks ago.
The short position in Yahoo will stay large and almost certainly will fluctuate sharply near term. There is too much money to make, with so much going on and going on so often.
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