Yahoo Degree-Gate: Lessons for Investors

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Yahoo Degree-Gate: Lessons for Investors

Earlier today, Dan Loeb revealed a shocking fact about Yahoo (NASDAQ:YHOO) CEO, Scott Thompson; his resume had been falsified. Dan Loeb, who is known for his fiery letters, filled a press release stating that the CEO had lied about his credentials. According to filings with the SEC, the CEO “holds a Bachelor’s degree in accounting and computer science.”

However, Loeb discovered that Thompson only had a degree in accounting and not in computer science. The shamed CEO was forced to admit this mistake. Yahoo is now calling for Thompson’s resignation, a sign that Loeb thinks his attack has worked. Loeb’s battle to take control of the web services company has been a heated one all along and this latest exchange has been no different.

This is an important lesson for investors. Dan Loeb did not hire detectives to steal Thompson’s college records. Loeb stated that “A rudimentary Google search reveals a Stonehill College alumni announcement stating that Mr. Thompson’s degree is in accounting only.”

Here is a quote from that article  which took two minutes to find:

Thompson, who graduated from Stonehill College in 1979 with a degree in accounting, will officially take over Monday as CEO at Yahoo, the company’s fourth chief executive in five years. He comes to Yahoo after heading eBay’s PayPal online payment division.

This is a very important fact; Loeb did almost no research and shocked all of Wall Street. All he did was search Google for a document available to the public. The author of this article just did a simple search and found the same thing.

Loeb is a genius but it does not take a genius to type a few words into Google. According to Fidelity Research, 33 analysts cover Yahoo. These include analysts from major banks like Citigroup, Deutsche Bank, JP Morgan and many other famous names.

Yahoo has been in the public eye for a while. First Microsoft was going to buy them, and then private equity firms announced they were talking with Yahoo, finally Loeb bought a large stake and began his battle.

Kara Swisher, a writer over at, unearthed an interview from 2009 in which the CEO does not contest his qualifications when they stated as in accounting and computer science. This is another example of somebody, even one as qualified as Swisher, discovering something that should have been known by analysts long ago. Due diligence is missing when it comes to many of these cases it seems.

To be fair, the CEO has only been on the job for five months. However, the analysts covering the industry read (or should) all of Yahoo’s fillings. The latest filling for their quarterly earnings was 126 pages. Not one analyst discovered this sample fact available to the public domain. The media which has been covering the Yahoo story in great depth also did not uncover this.

A few important points can be learned from this saga.

  1. Investors should not rely on analysts to do the work for them. Analysts clearly miss some major points
  2. The SEC cannot be relied upon. The agency and Yahoo!’s auditors should have noticed the mistakes in the documents. Even though Yahoo had PricewaterhouseCoopers LLP, a big four firm auditing them, the auditors seem to have missed this one.
  3. Most importantly, think like Loeb. While looking at the whole story, think outside the box and what you might be missing

Third Point is seeking to have Thompson resign by noon on Monday, promising a long hard weekend for the CEO. The proxy battle at the company continues  and investors will have to learn from the experience. If Loeb found this information easily anyone else could have done the same. The lessons are clear on the surface. If they’re learned it could mean a change in the way executives are vetted.

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