hyloka

Yahoo to Microsoft: No, Thank You

If you look at Google and Yahoo over the past 3 months, both have declined, and have followed about the same path (until the infamous “headwinds” hit Yahoo investors in the face when Yahoo announced earnings).

For the year, since January 2nd close, Google has declined from $685 a share to $516 a share, about a 25% drop. Yahoo closed on January 2nd at $23.72. A 25% discount on its stock would put it at $17.79.

Microsoft's offer represents a 63% premium on what a Yahoo share would have been worth if Microsoft had never made the offer and Yahoo’s stock followed the same trajectory as Google’s stock has on the year.

There are some reports that Yahoo thinks that it is currently worth $40 a share.

A $40 price would represent a premium of 125% over what Yahoo’s stock would have been on Friday if it followed the Google trajectory and would represent a gain on the year of 68%. Or, to put it another way, in Yahoo's world where value squandered through mismanagement and overall market decline magically reappears, Yahoo stock should be at $40 and Google stock should now be around $1150.

Google may be interested in trying to toe the antitrust line to save the enemy that it shot if it can thwart Microsoft in the process, but Google would probably be content to just let Yahoo bleed out on its own if Microsoft takes its bandages and walks away. That's exactly what might happen if Yahoo insists that it's value is so far off from what the maket or even a generous bidder puts it at.