Some shareholders have expressed doubts for much of the past year about whether CEO Marissa Mayer has a robust plan to revive the struggling Internet media business.
"I don't think the market's going to give any bump in value as long as the current management is in place," said Eric Jackson, managing director of SpringOwl Asset Management. SpringOwl, which hasn't disclosed the size of its stake, has pushed for Mayer's removal.
These investors criticize Mayer for what they say were a series of ineffective acquisitions and her inability to stem the continued decline in the value of the Internet media business as reasons to replace her. But some analysts have said it is unclear if anyone could have done a better job under the circumstances.
Yahoo hasn't publicly responded to critics and declined to comment for this story.
A person familiar with the matter told Reuters that Mayer has the support of Yahoo's board and will be given time to carry out the spinoff.
When the spinoff was announced, Mayer said the company was working on a plan to revitalize the core business that would be announced early this year. The company has yet to provide details of the plan.
A person familiar with Starboard's thinking said the activist hedge fund estimates the main operation could be worth around $5 billion to a strategic buyer, with a projected tax bill of around $1 billion, a hit it views as the cost of obtaining maximum value from the division.
Another shareholder in the top 10, who did not want to be named, had a slightly lower estimate of the tax hit, of between $400 million and $800 million, depending on the sale price.
SunTrust analyst Robert Peck said it would be possible to sell the business within "three to six months." Fran Shammo, the chief financial officer of U.S. telecommunications company Verizon Communications, told a media conference in New York in early December that it could be interested, and analysts say media and private equity firms may be as well. Uncertainty about the tax status of a spinoff is weighing on the investors.
"Investors are far from convinced by management's interpretation of the law and the advice they've been given," said Pivot Research analyst Brian Wieser.