Yahoo Going Public Again

[Saluki]

 

Scott Galloway, who is an investor talking about Yahoo going public again.  

 

I think Yahoo Finance does a really great job with the Berkshire AGMs and I always said that AGMs could be their "thing" for other companies like MSFT, GOOGL, TSLA, META etc.  I don't how Yahoo makes money, and how they pulled up from that nosedive before it went private but I'd curious to see their filing. I think Marissa Mayer gets a lot of hate for her disastrous run as CEO but they were a basket case before that.  The previous CEO had the opportunity to buy Facebook for a billion dollars.  Zuck's investors told him that if Yahoo came through with the billion dollars, that they would make him sell. The CEO, who told everyone who would listen that he was a great negotiator tried to talk Zuck down to $700mm because the market was tanking. "You're young, you'll still be rich and go live on an island surrounded by girls in bikinis".  Zuck went back to the investors and said they didn't offer $1 bln so he didn't sell.  

 

Prof G does make a good point about making money in distressed companies.  I remember one hired gun CEO saying that if you smell smoke, you should run towards the fire because that's where you make the big money. But the flip side of that is Peter Lynch's quip that "the problem with turnarounds is that most of the time, they never turn around." 

[Guest]

The whole Yahoo not buying Facebook thing is a good story but I think it's the wrong way to look at it. People give Blockbuster a lot of crap about not buying Netflix too. Facebook and Netflix may not have turned into the titans they are today if they were purchased by the then giant companies. Facebook could have turned into Myspace 2 for instance.  I mean, look at what happened to it after it was bought out. Then people would crap on Yahoo for wasting a $1 billion on it! 

Edited July 13, 2023 by stahleyp

[Xerxes]

Agreed. 
one cannot change one parameter in the past while holding everything else constant. Nowadays when I listens to a podcast I always fast forward when I hear a host making these types of comments:
 

- FB would have suffocated under Yahoo!

 

- Google would have been suffocated under Ballmer’ MSFT.

 

- Blockbuster would have destroyed Netflix if it had bought it. 

- Instagram would have been totally different if not owned by FB and has not leveraged it’s scale. 

Things happen they way they did precisely because a unique sets of circumstances. 

 

the only business that one can make these hypothetical “what if” are businesses where cash machines that didn’t not require much investment. Maybe See’ Candies if not acquired by Berkshire would have remained the same as independent. 

[Saluki]

I agree to a point. If they had done a passive investment like they did with Alibaba and had said "instead of a billion, how about $500mm for half the company, you can get rid of your investors who want you to cash out, and you can keep running it as is until you are ready to go public. We'll be hands off like if you sold to Berkshire" That's a plausible scenario with a happy ending. 

 

I think it's useful to study some of these industry leaders who stumble so that you develop some pattern recognition and can hopefully bail on something like Google, Amazon or Apple if you see the signs. I read an incredible book on Sears once.  Sears was such a dominant retailer that it had the company divided into 5 territories in the US because it was too big for one person to manage.  If you broke Sears up into it's territories, it would still be the 5 biggest retailers in the US. If you think of the Sears catalog and then realize that Sears founded Prodigy internet, you realize that it's not inconceivable that they could've been Amazon.  Apple credit card?  Sears had Discover. They created Allstate Insurance too, think of what they could do with that float.  They had so much cash lying around that they almost bought Caterpillar. 

 

So what happened? Ego.  The power always rested with the retail guys and they didn't like that Allstate, Discover and the new financial stuff was so profitable because it meant that they could end up running the company eventually, so they decided it was a distraction and started casting off the pieces as the retail continued to struggle.  Can you imagine if Amazon was not run by the founder and the e-commerce guys decided to spin off the cloud business because they saw it as a threat to their power? Stranger things have happened.  Maybe it's because I was an M&A lawyer and I'm programmed to look for things that can go wrong and anticipate and prepare for it? Maybe these cautionary tales have instructive value?  Maybe the ashes of fallen giants are good places to look for value (General Growth made Ackman his first fortune, Sam Zell wasn't called the grave dancer for nothing). Who knows?  

[Gmthebeau]

3 hours ago, Saluki said:

I agree to a point. If they had done a passive investment like they did with Alibaba and had said "instead of a billion, how about $500mm for half the company, you can get rid of your investors who want you to cash out, and you can keep running it as is until you are ready to go public. We'll be hands off like if you sold to Berkshire" That's a plausible scenario with a happy ending. 

 

I think it's useful to study some of these industry leaders who stumble so that you develop some pattern recognition and can hopefully bail on something like Google, Amazon or Apple if you see the signs. I read an incredible book on Sears once.  Sears was such a dominant retailer that it had the company divided into 5 territories in the US because it was too big for one person to manage.  If you broke Sears up into it's territories, it would still be the 5 biggest retailers in the US. If you think of the Sears catalog and then realize that Sears founded Prodigy internet, you realize that it's not inconceivable that they could've been Amazon.  Apple credit card?  Sears had Discover. They created Allstate Insurance too, think of what they could do with that float.  They had so much cash lying around that they almost bought Caterpillar. 

 

So what happened? Ego.  The power always rested with the retail guys and they didn't like that Allstate, Discover and the new financial stuff was so profitable because it meant that they could end up running the company eventually, so they decided it was a distraction and started casting off the pieces as the retail continued to struggle.  Can you imagine if Amazon was not run by the founder and the e-commerce guys decided to spin off the cloud business because they saw it as a threat to their power? Stranger things have happened.  Maybe it's because I was an M&A lawyer and I'm programmed to look for things that can go wrong and anticipate and prepare for it? Maybe these cautionary tales have instructive value?  Maybe the ashes of fallen giants are good places to look for value (General Growth made Ackman his first fortune, Sam Zell wasn't called the grave dancer for nothing). Who knows?  

 

Management of a company is super important.  Sears was eventually run by some really incompetent people.  GE was at one time on top of the world until incompetents took over.  This list is endless.  Ballmer ran Microsoft into the ground practically, once he left boom they got a real leader and are minting money again.  This is why turnarounds almost never work unless you bring in an outsider with a proven track record of performance.  Simply thinking the management that ran you into the ground will somehow magically right the ship virtually never works.  Also, why I don't think Iger will turn around Disney.  Chapek takes all the blame but he inherited what Iger left him which was a company not positioned very well.   Iger will try to put lipstick on it and hope he can sell it.

Edited July 13, 2023 by Gmthebeau

[Xerxes]

4 hours ago, Saluki said:

Can you imagine if Amazon was not run by the founder and the e-commerce guys decided to spin off the cloud business because they saw it as a threat to their power? Stranger things have happened.  Maybe it's because I was an M&A lawyer and I'm programmed to look for things that can go wrong and anticipate and prepare for it? Maybe these cautionary tales have instructive value?  Maybe the ashes of fallen giants are good places to look for value (General Growth made Ackman his first fortune, Sam Zell wasn't called the grave dancer for nothing). Who knows?  

I agree with the idea of exploring “what if” scenarios, all I am saying is that it cannot be linear. As in we change only one parameter and all else remains the same. 
 

The case of Booking and Priceline is interesting. The former did not suffocate under the latter. Perhaps because one was not disrupting the other. Whereas the incumbent (say Blockbuster) would have crushed the newly acquired disrupter (say Netflix) in that “what if” scenario of Blockbuster buying up Netflix 
 

on Amazon in a non-founder “what if” scenario say after it’s 10th year after IPO (say Bezos was gone in 2006), my guess is AWS would not even be conceived. 

Edited July 13, 2023 by Xerxes