Investing.com -- Third Point LLC, a New York-based hedge fund, run by activist investor Daniel Loeb, settled charges with the Federal Trade Commission and the U.S. Department of Justice that it failed to properly file for antitrust clearance when it amassed a significant position in Yahoo! Inc (NASDAQ:YHOO) in 2011.
In September, 2011, Third Point called for the resignation of several members of the Yahoo Board of Directors after disclosing its stake in the multinational internet search engine company. Months later, Loeb launched a successful bid to dislodge Scott Thompson as the company's CEO and replace him with Marissa Mayer. At the time, Third Point owned about 5.3% of the company through its stock holdings.
Loeb also reportedly wrote a letter to the Yahoo board in May, 2012, claiming that Thompson said in an SEC filing that he had earned bachelor degrees in computer science and accounting when a Google (NASDAQ:GOOGL) search showed that the degree was in accounting only. Following the revelation, Thompson resigned less than two weeks later. By July, Mayer succeeded Thompson as the president and CEO of Yahoo.
Twelve months later, Loeb and two other members of Third Point's management team resigned their positions from the Yahoo board after the company bought back 40 million of the shares previously owned by the fund. Third Point still reportedly netted a profit in excess of $1 billion from its activity in Yahoo.
While the Hart-Scott-Rodino (HSR) Act exempts investors who purchase up to a 10% stake in the company from disclosing purchases solely made for investment purposes, the FTC alleged that the HSR Act still requires individuals and companies to inform the FTC and Department of Justice of most large transactions that affect commerce throughout the country. The acquiring company according to the act must then observe a waiting period before closing their transaction, while the FTC or Department of Justice determines if the transaction could result in a substantial lessening of competition, the FTC said in a statement.
“The investment-only exemption is a narrow exemption limited to those situations in which the investor has no intention to influence the management of the target firm,” FTC Bureau of Competition director Deborah Feinstein said in a statement. “Here, Third Point’s conduct demonstrated that it intended to have more than a passive interest in Yahoo, which obligated its affiliated funds to make an HSR filing and wait before acquiring its shares.”
In a 3-2 vote, the FTC referred the settlement to the Department of Justice after two dissenting commissioners argued that the hedge fund should not have been sanctioned. As part of the settlement, Third Point was not issued a fine but entered into a five-year agreement to make appropriate disclosures to the federal agencies.