Should Investors Follow Dan Loeb Out of Yahoo! Inc. (YHOO)?

Yelp Inc (NYSE:YELP) has seen its shares surge on Yahoo! Inc. (NASDAQ:YHOO) takeover rumors in the past, and it could give the company a foothold into the growing local market. Yahoo! used to be a big player in this market (Yahoo! Local was big decade ago), but Yelp has come to dominate the space in recent years.

Still, I’m skeptical of a Yahoo! bid for Yelp Inc (NYSE:YELP). Mayer has said she has no interest in mapping, and Yelp’s value might be best as part of a maps application. Google Inc (NASDAQ:GOOG) purchased Yelp’s rival Zagat and integrated it into Google Maps. Thus, it would more sense for Apple Inc. (NASDAQ:AAPL) to buy Yelp for its own maps app, then it would for Yahoo! to buy the company.

Rumors have also linked Yahoo! Inc. (NASDAQ:YHOO) to OpenTable Inc (NASDAQ:OPEN). Analysts at Wunderlich speculated as much, writing in March that a deal could make sense.

But as with Yelp Inc (NYSE:YELP), it’s hard to envision OpenTable Inc (NASDAQ:OPEN)’s strategic value to Yahoo!. The $1.45 billion online restaurant reservation company is profitable and dominates its industry, but seems like too much of a niche for a large Internet platform like Yahoo!.

That said, there might be reasons to own OpenTable Inc (NASDAQ:OPEN) apart from a potential takeover. The stock does carry a high short float percentage — nearly 20% — which could result in some potent short squeezes.

Investing in Yahoo!

With Loeb scaling out of Yahoo! Inc. (NASDAQ:YHOO), the investment story may have completely changed. The company’s recent rally has been prompted largely by a share repurchase program. That program was the result of Yahoo!’s decision to sell half its Alibaba stake.

Yahoo! will receive another large chunk of cash sometime in the near future. When Alibaba goes public, Yahoo! could bring in billions.

But what the company does with the money is key. When Loeb was on the board, investors may have been confident that they would be getting the cash returned to them directly. With Loeb gone, it’s not as clear. Instead, that money could be used for acquisitions.

And if that’s the case, it will completely change the Yahoo! Inc. (NASDAQ:YHOO) story. Until now, Yahoo! has been a capital return story; going forward, it will be all about Mayer’s plan to revitalize Yahoo!.

Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends OpenTable.

The article Should Investors Follow Dan Loeb Out of Yahoo!? originally appeared on Fool.com.

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