The WSJ reported yesterday that former AOL chief Jon Miller was asking private equity firms and sovereign wealth funds to help him finance an acquisition of all, or part, of Yahoo. This came just days after a UK report that Microsoft would buy Yahoo’s search business, and put Miller and Ross Levinsohn – former Fox Interactive president and Miller’s current partner at VC firm Velocity Interactive Group – in charge.
Both reports appear to have been bogus, based on subsequent reports and conversations I’ve had with knowledgeable sources. As such, three points:
1. Velocity is in the midst of raising its first fund since Miller and Levinsohn joined late last year, so it’s no surprise that the pair is talking with funding sources. At its annual LP meeting last month in California, Velocity told investors that it had already secured some capital commitments — mostly from corporations and foreign sources – but that it still has a way to go.
These two Yahoo stories, however, add a heavy burden to future fund-raising. Not only must Miller and Levinsohn navigate the most stagnant LP waters in memory, but they also must fend off nagging accusations of wanderlust. This gets even trickier with Miller not making any public statements, due largely to the continued presence/enforcement of his non-compete agreement with Time Warner (note: Miller didn’t even provide a quote to the original press release announcing that he had joined the firm).
2. It would not at all surprise me if Miller talked with Yahoo. Why? Because before joining Velocity, Miller and Levinsohn wanted to form a PE-backed Internet rollup that largely failed because of inflated valuations and inflated CEO egos. The air has been let out of both, which makes it likely that Velocity would evolve from an early-stage VC shop to a more diversified fund that cares less about a company’s age than its potential. As such, there could be non-core pieces of Yahoo – or of other companies — worth buying. Remember, Velocity was part of the CNet buyout attempt (even though it didn’t actually put in any money).
3. Yesterday’s WSJ report goosed the value of Yahoo stock, which raises the obvious question of stock manipulation. Mike Arrington suggests that the SEC should begin asking questions, and I think the WSJ should as well. If WSJ editors determine the paper was intentionally deceived, it should divulge the offending sources. We journalists provide confidentiality to protect, not to help cover up.
