As Yahoo! shares fall, takeover rumors resume
By Michael W. Jones
Prices of Yahoo! shares are falling in synch with most other stocks, triggering speculation that the search and portal company could once again become a takeover target. Shares in the company have fallen to $12.29, less than half of the $31 per share that Microsoft offered in their takeover bid in February.
As with much of the market, Yahoo! shares are not expected to perform well in the short term. In lowering expectations for Yahoo! stock, Jeffrey Lindsay of Sanford C. Bernstein & Co. had the following to say, “Our new valuation is based upon our pessimistic outlook for GDP and earnings growth but assumes no further short term dollar appreciation, which we now think is less likely following the recent government bail-out of Freddie Mac and Fannie Mae and the likely downward impact this will have in interest rates and the U.S. currency.” In other words, don’t hold your breath.
With prices in free fall, some analysts feel that Yahoo! could become an even more attractive target. However, other experts, such as Matt Roshoff of research group Directions On Microsoft, believe that suitors such as Microsoft may not be after all of Yahoo! next time; they may just want the search engine. Roshoff said, “I think they’re looking at Yahoo as a rapidly declining asset.” Roshoff expects Microsoft to bolster its own search operations while waiting for Yahoo! values to fall even further.
Clearly, with prices down and market conditions worsening, any offer for Yahoo! would create a great deal of angst for company shareholders and for the Yahoo! board. Investors would almost certainly place more pressure on the board to accept any new offer, which would probably be higher than market value, as most such offers are. Jerry Yang, Yahoo! CEO and the Yahoo! board might be hard pressed to hold off a takeover offer under current conditions. The biggest question may not be whether or not a bid will come. Rather, it may be that the most important question will be, “Has Yahoo! stock bottomed yet?”
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Stumble It!
October 12th, 2008
Even if Yahoo shares come down, will anyone interested in buying them have access to capital? We are living in extremely uncertain times.
October 12th, 2008
MS is sitting on millions in cash, so yes there is money out there.
How Yang has kept his job baffles me.
October 13th, 2008
@Jason Reavsby -
There is indeed some cash out there, and there is always stock. There are compannies that could afford such a deal. Still you are exactly right about the uncertain times!