Hedge fund company SpringOwl unleashed a brilliant Public Relations take-down campaign aimed at Yahoo which has been covered in media worldwide this week. In a 99-page presentation, the investment company called for Yahoo to reduce their workforce by 80% and replace Chief Executive Marissa Mayer for her spending excessive amounts of shareholder money.
While SpringOwl has an undisclosed investment in Yahoo, their proposal seeks to eliminate 9,000 of the 10,700 full-time employees. It also proposes a slash of wasteful spending on free food and parties potentially saving the company $2 billion dollars annually.
Whatever else it was, it was brilliant hedge fund public relations work. As Forbes Magazine profiled, the campaign is “using the principles of Giant Killer Marketing” to get out-sized attention, and is a masterpiece of PR and marketing.
It is uncertain how much Yahoo is going to change due to this proposal. However, the SpringOwl’s campaign is a major success story, which highlights the investment firm as forward-thinking activist investors, consistent with a great track record in 2015 of positively changing the companies in which they have invested to date.
SpringOwl is represented by New York PR Agency 5WPR.
Yahoo would look very different if it takes all the suggestions proposed by SpringOwl. For one, it would go through a painful transition and downsizing. Additionally, SpringOwl lobbied for Yahoo to draw on cash reserves, sell real estate, also for them to borrow money to buy back shares and push up the stock price. It would replace Mayer and a number of other executive board members who have “frittered away billions of dollars during Mayer’s tenure on research or acquisitions that have not paid off,” according to this article. The firm also listed some attributes they would like to see in a future executive.
Yahoo’s Recent Changes
The proposal is a response to earlier announcements by Yahoo reorganizing the company by keeping its stake in China’s Alibaba, but spinning off its core Internet business. This decision marked a U-turn on a previous Yahoo plan spinning off its vast holdings in e-commerce giant Alibaba, exposing it to a huge tax bill. Spring Owl rejected this proposal saying it looked “unattractive” for investors, and instead proposed its own changes. The proposal would not overextend the company but rather downsize it and look at more realistic goals going forward.
The Public Relations
SpringOwl’s proposal to reduce Yahoo is not only an economic decision but a sign of the times. Yahoo has been struggling in recent years due to competitor sites like Google and finds itself more and more obsolete in the current market. Additionally, CEO Marissa Mayer has been under fire in the news for a lavish Christmas Party, which reportedly cost an excessive $7 million.
The party was Gatsby-themed and prompted negative publicity for Yahoo. SpringOwl, in their proposal to cut staff and rebrand the company, capitalized on the opportunity to be both critical and constructive.
This is hedge fund public relations at its best.