Icahn aims for Yahoo fireworks before July 4

Update 1 p.m. PDT, with more information on the timing of Icahn's definitive proxy and alternatives.

Investor activist Carl Icahn is expected to file his definitive proxy by July 4, signaling whether he will ultimately run a dissident slate of directors to unseat a majority of Yahoo's nine board members, or look to oust just a few, according to sources familiar with the billionaire investor.

Icahn is gearing up to share another round on his "views about Yahoo and its management shortly," according to a posting on his Icahn Report blog Friday.

Icahn, who filed another preliminary proxy just the other day, has yet to file his definitive proxy. The definitive proxy will list the final number and names of candidates Icahn wants to run against Yahoo's nine-member board when it holds its annual shareholders meeting on August 1. That definitive proxy will indicate whether Icahn seeks majority control of Yahoo's board seats, or minority representation.

As part of any proxy filing process, a dissident shareholder may face some back-and-forth discussions with the Securities and Exchange Commission, prior to filing their definitive proxy. And, as one would expect, a dissident shareholder would be loath to disregard any SEC comments before filing their definitive proxy.

In his Friday blog post, Icahn notes:

Many of you have been asking me about Yahoo. Please remember I am in the middle of a proxy fight. A proxy fight involves a complicated process of SEC approvals, federal securities laws, filing requirements and a great deal of time and money.

At this time, due to SEC regulations, I do not intend to post your comments regarding the proxy fight. However, I am planning to give you my views about Yahoo and its management shortly. If you wish to be informed I invite you to subscribe. Stay tuned.

Meanwhile, a portfolio manager with Yahoo's third largest investor, Legg Mason Capital Management, expressed reservations Friday about supporting an Icahn board unless the billionaire investor activist can develop a "Plan B" should Microsoft fail to do a deal with the search company, according to a Reuters report.

Robert Hagstrom, a portfolio manager with Legg Mason Growth Trust, was quoted by Reuters at the Chicago Morningstar annual investment conference as saying:

"Icahn has got three things. He wants to fire Jerry, eliminate the severance package and he wants to force the sale...If he can't force Microsoft to buy them, what's plan B? I need a plan B. And if you are going to fire Jerry, who do you hire?"

Meanwhile, some Yahoo investors like Eric Jackson are calling on Icahn to run a minority slate of dissident directors, in an effort to increase his chances of getting representation on the Yahoo board.

Jackson, as well as a source with a proxy solicitation firm, noted that it may be difficult for Icahn to win control of Yahoo's board should no deal with Microsoft loom on the horizon. But even with a minority slate, Icahn may find success in pushing for change from within.

Another option is for Icahn to run a full nine-member dissident slate and hope that proxy advisory firms, such as RiskMetrics, Glass Lewis & Co., and Proxy Governance, advise their institutional investor clients use Icahn's gold proxy card, rather than Yahoo's white proxy card, and vote for all of his nominees.

But absent these advisory services advocating for electing all of Icahn's dissident directors, the investor activist may find these advisory services may be willing to recommended that some of his candidates get elected, noted one source.