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Icahn stock buy gives Yahoo shares a boost

November 28, 2008 |  1:30 pm

Billionaire investor Carl Icahn spurred a rally in Yahoo shares today after he disclosed that he had increased his stake in the struggling Internet company.

Shares surged nearly 9% in the shortened trading session after Icahn, a Yahoo board member who has been pushing a strategy shift or a sale to Microsoft, said he had bought about 6.8 million Yahoo shares. A Securities and Exchange Commission filing showed that Icahn had paid an average of $9.88 per share from Monday through Wednesday, boosting his holdings by about $67 million. The purchases gave Icahn a nearly 5.5% stake in Yahoo worth around $870 million based on today's closing price of $11.51.

Carl Icahn

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 the company's 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 this 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 CEO Steve Ballmer says he is no longer interested in buying Yahoo, though he has expressed interest in snapping up its search business.

Earlier this month, Yang said he would step down as head of the company he co-founded as soon as his successor is found. So Icahn's stock purchases are likely to fuel speculation over Yahoo's search-in-progress for a new CEO. The board has begun to interview potential candidates.

Motley Fool analyst Rick Munarriz said Icahn was trying to recover from a nearly $1-billion loss on his original Yahoo stock-buying spree. Earlier this year, Icahn bought about 69 million shares of Yahoo for an average of about $25 a share.

"It makes perfect sense: At this price, Yahoo is ridiculously low," Munarriz said. "He’s try to correct his mistake at this point."

The market will pay heed, Munarriz added. "Now he knows the company from the inside. If he's spending more money, it's an encouraging sign for Yahoo investors."

-- Jessica Guynn

Photo: Carl Icahn. Credit: Jeremy Bales / Bloomberg News

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