Activist investment firm Starboard Value has warned Yahoo that it should not make any major acquisitions, citing speculation that the company may sell its $40 billion stake in Chinese e-commerce giant Alibaba to finance a buying spree.

Marissa Mayer: Under fire again.

Yahoo CEO Marissa Mayer has yet to disclose her plans for the Alibaba stake, which accounts for most of the company’s $46 billion market capitalization. As Bloomberg reports, Yahoo’s performance has been increasingly in the spotlight since Alibaba’s IPO in September.

In a letter to Mayer, Starboard founder Jeffrey Smith said he had become “increasingly concerned” by reports that Yahoo is looking to make major acquisitions. He reiterated that Yahoo should unlock value by monetizing assets, trimming costs and exploring a combination with AOL.

“Should you instead choose to proceed down a different path by pursuing large acquisitions and/or a cash-rich split, both of which have been speculated, such actions would be a clear indication to us that significant leadership change is required at Yahoo,” he wrote.

A cash-rich split is a tax-saving maneuver that would require Alibaba to create an entity with two-thirds cash and one-third operating businesses that it would trade to Yahoo for the entire Alibaba stake. Smith said Starboard has spoken with large Yahoo shareholders, who also prefer a tax-efficient spinoff over a cash-rich split-off.

Yahoo has been rumored to be considering a deal to buy cable TV channels including Scripps Networks Interactive and Time Warner’s CNN. It reaped more than $9 billion before taxes by selling some Alibaba shares in the IPO and still retains a 15% interest in the Chinese company.

“Starboard has a point,” Brett Harriss, an analyst at Gabelli & Co., told Bloomberg. “There are a lot of acquisitions that haven’t generated any financial returns.”

Photo: Magnus Höij, Wikimedia, CC BY-2.0.