Billionaire investor Carl Icahn is considering launching a proxy fight at Yahoo, according to people who have spoken with Icahn.
Icahn has declined to comment.
Late last week, Icahn began building a significant position in Yahoo that may be as much as 50 million shares, these sources said.
Yahoo shares were recently trading higher.
Although other activist investors had considered mounting a fight to replace all of Yahoo's board, they stood down from that effort when they were unable to get any sense from Microsoft that it would support them.
Earlier this month, Microsoft
Icahn also has been unable to get a confirmation that Microsoft will return to the negotiating table should all or part of Yahoo's board be replaced, but unlike other investors, Icahn may choose to forge ahead anyway.
If he does, he seems likely to run a so-called short slate of directors, targeting perhaps three or four of Yahoo's ten board seats.
It would be a risky strategy especially because beyond a deal to sell out to Microsoft, there don't appear to be too many levers to pull in order to create near-term shareholder value.
If Icahn were to win those three or four board seats - as would seem highly likely given investor disenchantment with Yahoo's board - chances are good he could force a deal with Microsoft, if the company is willing.
Icahn has employed a similar strategy in the past. His pressure helped to bring Oracle back to a deal with BEA Systems.
If Icahn wishes to pursue this strategy he will need to act fast as the deadline for a proxy fight is this Thursday.
Meanwhile, Vocal Yahoo dissident shareholder Eric Jackson has decided not to run a competing slate of directors to replace Yahoo's board.