Ina letter to Yahoo's board, Loeb announced the fund's investment in the web portal and also called for broad changes to the company's board of directors.
On Tuesday, the chairman of Yahoo's board fired CEO Carol Bartz, and in his letter, Loeb charged that the board made a "serious misjudgment" in hiring her.
"It is now widely accepted that the board made a serious misjudgment in approving the hiring of Carol Bartz as Yahoo’s chief executive officer, given her inexperience in the consumer-oriented Internet space," the letter said. "While the decision to hire her alone is grounds for questioning the board's competence, its willingness to turn a blind eye to these serious problems ... is even more troubling."
Loeb also called the board's decision to turn down Microsoft's takeover bid in 2008 for $33 a share, or $47.5 billion, a "gross error."
David Garrity, a principal at GVA Research, told CNBC that while Bartz wasn't responsible for the Microsoft rejection, she compounded the company's problems.
"She didn't anticipate things like social media, the rise of Facebook, and any one of a number of other trends that undermined the Yahoo franchise," he said.
Meanwhile, Yahoo shares received an additional goose in late-afternoon trading after Business Insider reported that co-founder and former CEO Yang is trying to re-take control of the company.
Business Insider said Yahoo Chairman Roy Bostock is in a battle with Yang over the company, citing one source. "Bostock is trying to keep Yang out," a source close to the situation told Business Insider. "It's playing out in meetings here."
Yang owns 3.63 percent of Yahoo, while David Filo, his fellow co-founder, owns 5.80 percent, according to the website.
Yahoo's board had "no comment," Business Insider said.
Colin Gillis, senior tech analyst at BGC Financial, told CNBC he has a “hold” rating on the stock, saying he expects the shares to “grind sideways” for the rest of the year. He added that the company’s display revenue growth remains under pressure.
At the close of trading Thursday, Yahoo shares were up 83 cents, or 6.1 percent, at $14.44.
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