Yahoo Rises as Icahn Mulls Proxy Battle

The report by CNBC comes more than one week after Microsoft withdrew its sweetened $33 per share takeover offer -- which Yahoo rejected as too low -- and two days before a crucial deadline for shareholders to nominate an alternate slate of Yahoo directors.

"It's a winning position," said one arbitrage trader in response to the report. "It's backed by majority of shareholders. It's not like he's going against the grain."

Top Yahoo shareholders lashed out at Yahoo's board after it failed to secure a deal with Microsoft, which announced its offer on Feb. 1. Microsoft last weekend raised its bid from $31 per share to $33, or $47.5 billion, but Yahoo executives indicated their price was $37.

Yahoo shares fell as low as $22.97 before closing at $24.37 last Monday, the first day of trading after Microsoft's withdrawal. Shares then climbed more than 5% in heavy trading the following day amid speculation that activist shareholders were amassing positions in Yahoo in preparation for a proxy battle.

CNBC said Icahn may have bought as many as 50 million Yahoo shares since last week. A spokesperson for Icahn declined to comment on the report.

Yahoo shares have since been trading near $26 in hopes that Microsoft may yet revive its offer after an activist shareholder forces Yahoo's board back to the table.

Microsoft, however, has publicly stated that it has now "moved on," but many observers believe Microsoft would return to the table under the right circumstances.

May 15 looms as a key date for Yahoo, its investors and Microsoft. That is the deadline for dissident shareholders to file a slate of alternate directors for Yahoo's board, the first step in what would be a hostile effort to replace Yahoo directors with board members who would be receptive to a Microsoft bid.

-- Scott Morrison, Dow Jones Newswires