Expect more activism in Yahoo, says hedge funder

Yahoo stock undervalued: Burbank

Unless Yahoo quickly addresses how its business is doing poorly and it hasn't adequately allocated capital, the Internet company will soon face additional activism, hedge fund manager John Burbank told CNBC on Wednesday.

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"In this, sort of, era of hyper rationalization, it's not OK to waste $15 billion on taxes," Burbank, chief investment officer at Passport Capital, said on "Squawk on the Street." "I think, either they have a plan that the market's going to like, in which case the stock is going to go up, or they're going to have a plan that's unsatisfactory and then they'll be attacked with further activism."

After all, Yahoo gets hit with a hefty tax bill thanks to its sizable stake in Alibaba.

To Burbank, CEO Marissa Mayer should emulate billionaire John Malone. Earlier this year, the chairman of Liberty Media Group announced plans to spin off its cable assets by paying shareholders a dividend to establish a new publicly traded company called Liberty Broadband.

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"I think, what would John Malone do? If John Malone ran Yahoo, the price, the stock would be up a lot because they would presume a reverse Morris trust, separation of assets, you got Alibaba tax free, spun off," he said. "But you could just separate them into two parts and the value would be a lot more."

Instead, the market has "seen through" Mayer and Yahoo's board of directors, Burbank said. Within the next few months, though, Yahoo's leadership will have to unveil their plan because the market will not allow a "wasting of money to pay taxes when you could separate assets," he said.