Yang Still Needs To Make Nice With His Biggest Shareholders

Yahoo founder Jerry Yang may have dodged a bullet by settling with angry investor Carl Icahn, giving him aboard seat and agreeing to open up two more. That victory was secured in part by talking one of Yahoo’s biggest investors, Legg Mason’s Bill Miller, into backing him. But that doesn’t mean Friday’s shareholder meeting will be smooth sailing.

Yang still needs to win over Yahoo’s biggest shareholder, the Capital Group, which owns 16 percent of Yahoo’s shares through two funds: Capital World Investors (9.85 percent) and Capital Research Global Investors (6.53 percent). Gordon Crawford, who runs Capital Research, is still unhappy with Yahoo’s direction and future prospects. And he might vote against some directors on Yahoo’s board, including Jerry Yang and chairman Roy Bostock, to signal his ongoing displeasure. (Crawford does not control the shares owned by Capital World Investors, but it’s not a stretch to think that all of the Capital Group shares would be voted as a block).

It would be largely a symbolic move at this point, unless individual shareholders join him in a mass revolt. But Crawford can use his threat of voting against Yang and Bostock to negotiate some of his own conditions. What those would be is not clear (anything to get the stock price up). Maybe a change at the top would satisfy him.

Regardless of what happens at the shareholder meeting, Yahoo’s largest investors (Crawford, Mason, Icahn, John Paulson) will be in a better position to force a sale or other action. If they could just agree what that action should be.