The buyer in any public-public merger generally sees a stock price hit - they’re offering a premium over what the market thinks the seller is worth, and the market takes that out of the buyer’s hide. But Microsoft lost nearly $40 billion in market cap in the eight trading days since they made their offer. That’s quite a penalty - and one Microsoft likely didn’t plan on dealing with.
Microsoft closed at $32.60 per share on January 31, hours before the Yahoo bid was placed. On Friday, the stock closed at $28.56, a decline of about 13% and the lowest it has been since 2006. That erased just under $38 billion in Microsoft shareholder value.
The Microsoft offer is half cash, half stock. As Microsoft’s share price declines so does the offer price for Yahoo. It may be a coincidence that the amount of market cap that has vanished is almost exactly the same as the bid amount (the two numbers converge as stockholders flee Microsoft). But coincidence or not, Microsoft has shrunk by a Yahoo in the last eight days.
Yahoo is now putting up a fight (to the delight of Silicon Valley in general, Google specifically and bloggers everywhere), and Microsoft needs to decide if they’ll bid higher or stay firm. Microsoft will get this deal if they have the stomach for it. But with the market charging Microsoft nearly $1 in market cap for every $1 they bid, the Yahoo deal is looking to be a lot more expensive than it should be. Cue a sad song from the world’s smallest violin, please. And pass the popcorn.
The market’ll correct when Yahoo accepts.
yes, but which way?
Yahoo could put up an all-cash-only as a condition… in that case, serious buyers only
MSFT’s stock should bump a bit, unless they end up paying closer to a $40 level.
Current MSFT stock has already baked in a $31-$35 offer (now that everyone’s had some time to digest), so consummating the deal shouldn’t lower MSFT anymore…. and if deal doesn’t happen, shareholders will return since they’re sitting on crazy cash reserves (read: buyback or special dividend).
But for MSFT’s sake, this needs to end quickly, one way or another.
Yahoo is on a course to get swallowed up. Rumors have been circulating for over a year.
Stopping this deal would be like trying to turn the Queen Mary in a bathtub.
The deal will be good for everyone. It will free up space for smaller players like Vclick and AOL to really take off and ultimately lead to more opportunity for everyone.
Good time to buy some Microsoft shares?
On Monday when Yahoo! sends the letter that they are declining the offer, YHOO will be lower than its $18 (and change). I expect Yahoo! to be trading in the $15-17 range and in the $10 range by the summer. With this stock drop, MSFT will be able to buy YHOO on the cheap. However, MSFT is now instantly number 2 in the Internet space. Yahoo!’s customers will jump the sinking ship.
Declining and fighting is probably their dumbest move.
When you aren’t reading Kara and her “insider”, the truth is that most of the YHOO employees want to go to Microsoft, especially if they will be richer. For the employees, they hate Google more than they hate Microsoft and all that matters is a stock that makes them much richer than they are today. The real Yahoo! crisis is that the majority of the employees want to be as rich as Google employees and the Microsoft deal helps that. The rejection makes Yahoo! a second rate AOL and the beginning of the 3 year death begins.
Yahoo!, well come to the dead pool.
As I pointed out in the last post, MSFT has lost even more value than you indicate here. The stock was trading at $35 a few days earlier when they released stellar earnings when a huge (and most would say suspicious) high volume selloff began and didn’t stop until Friday.
It is obvious from the trading, that big holders of MSFT knew this deal was coming. I mean, come on, Goldman Sachs is advising MSFT on the deal so they obviously knew. If MSFT ups their bid to $40, I fully expect MSFT to trade down to $26 at least temporarily.
Arie, if YHOO goes down that far on Monday it would be a killer buying opportunity. MSFT will not give up on this deal yet.
I totally agree that the bid helped to move the stock lower. I am not 100% sure it’s the only reason - I made a chart of some other tech companies and their declines over the same period:
http://www.centernetworks.com/.....yahoo-deal
Looks like Baidu is off more than MS at -16% (I know its a China play) and even Apple/Google are off 8%.
So perhaps it’s a combo of the bid plus the general market conditions? Where’s Cramer when you need him
Obviously, Microsoft expected a Yahoo denial — is there a planned 2nd phase that they were expecting and want? For example, could this be a way to distract a major competitor with no real intention of acquisition follow through?
All media companies should stay out Microsoft/Yahoo stuff this monday. Investors can do anyone. They are more powerful RIAA. They have power to sue blogger companies, expensive media, any companies who printed false light about Yahoo/Microsoft stuff.
I’m keep off. I have nothing to with… It’s micheal and some posters.
I’m not saything shit about Microsoft/YAhoo.
Sue Mick, CNET, WSJ, etc…
Because I read it correct.
Information is provided ‘as is’ and solely for informational purposes
It’s called dilution…
I’m back off…
Off the topic, but where is Crunchbase?
#10,
Allen, it has a lot to do with the bid (90%). Apple and Google went down because of their missed earnings/guidance. When was the last time Google missed both top line and bottom line? Microsoft had good earnings, but this Yahoo bid hammered it and it broke the $32/share resistance. It might drop to as low as $25 depending on how much they are willing to pay Yahoo. But the stock is already priced in a lot. Their operation cash flow is about $20b yearly. They can surely afford Yahoo just fine.
A lot of people just forgot how big the company Microsoft is. It’s a huge takeover for sure, but it’s Microsoft.
Microsoft isn’t be blame for this. If monday, Yahoo’s stock crashed like Enron… Oh man… Oh man… Oh man….
America’s economy will get worst. worst.. worst…starting to frighten investors, CME, NYSE, Wallstreet, people & advertisers. Expect homeless people.
Investors of yahoo is worry about mondey hit.
Mortgage crisis, high food cost, high advertisment cost, high gas prices, high kitchen stuff. It will make economy black shadow.
Can you at least write something good instead of popcorn.
This is about to get really, really interesting.
yahoo will be a $50 stock in three months
This monday… My prediction stock Goog, MSFT, Yahoo stock will mostly likey to drop very bad.
VERY BAD.
Interesting drama and bad bloggers & bad media pressure.
PinkConnection.com is not likely to happen…. Yahoo accidently brought Boardcast.com and losing millions after youtube success.
This is why IRS will force Mark Cuban to pay $1.6 billion back to Yahoo.
I think the the comment I heard on venturebeat.com is kind of realistic. Basically search results are becoming a commodity. Are the results from Yahoo, Google, MSN, Ask, etc. that different?
Yahoo’s problem seems to be more a marketing problem than a tech problem.
I don’t know if anyone on this blog has used Yahoo search lately, but Yahoo search with the automatic “suggest” is actually more user friendly and much more visually pleasing than google’s. I used to use google for everything, now I find Yahoo’s suggest to be more useable because it got me to the answers much faster with less typing. Yahoo’s result page has more suggestions if you click on the little arrow.
One thing that bugs me about google is how do you turn on google suggest. I had to google “google suggest” to find out. And there doesn’t seem to be a way to turn it on for return visits
Why don’t you talk about stuff like that?
IMHO, Techcrunch should try yahoo search sometime instead of blindly doing infomercials for google all the time, maybe do a taste test or something. And maybe do some real analysis as to why some kind of Yahoo marketing would fail or succeed or whatever.
Too much bashing, more dynamic analysis of more diversified ideas would be better.
This is a blog. You want to write your own? Do it. You dont like this one? Dont read it.
Oh yeah, what’s with 12, 14, 17, and 20? Fake non-native “english”? WTF???
#22,
Anon2, finally someone with a good point. I too like the search/suggest drop-down, esp on Yahoo Finance. You can easily search for a stock, by name or symbol. Very neat.
They do need to get people to “yahoo it”.
Techcrunch is really bad company. It’s far hurting yahoo/Microsoft/google.
Google also owns tiny yahoo shares.
We are glad Google jet kick out mike. Mike takes revenge against Yahoo/Microsoft/Google. He does attack them.
if u believe in YHOO so much, then why not tell us ur name? hiding behind an anon name?
Scenario 1:
YHOO search results are different from MSFT and GOOG. it’s not a marketing problem, it is a technical problem. Well, YHOO sucks.
Scenario 2:
YHOO search = GOOG search = MSFT search. In this case, why the heck did YHOO work on Panama, if it wasn’t a technical problem? Stupid management? Why didn’t they put that money towards marketing themselves better? Again, YHOO (i.e. its management) sucks.
I have worked with YHOO product managers and VPs in the past. They are the most moronic bunch you can ever deal with.
FACT: YHOO does not let you bid on “exact” keywords, only broad keywords. Google lets you do that. No, that’s asinine in my mind.
So, the next time you tell TC or anyone else that YHOO is the same, check your facts and your logic. Oh wait, you support YHOO so we shouldn’t expect either from you!
ms should drop yahoo like a bad habit. not worth the time, money or trouble.
did you notice how much google’s market cap got erased since microsoft’s announcement for the yahoo bid?
Americans can’t locate the U.S. if that’s you…
Noah, I seriously agree. They should take $44 B and do the following:
a) Offer good salary increases to their current employees and those who are willing to jump ship from YHOO, who is great at wasting their talent. “Show us your option grant letter and we will pay you at $31/share”
b) Do deals with major content providers that take Yahoo out of the picture. Yahoo is king when it comes to content and that’s pretty much it. Even that is getting more distributed every day.
c) Buy Bebo or another social network for way cheaper than Yahoo.
So, with (a) you get good employees and with (b) and (c), you can get users. I don’t care for Yahoo technology - it’s crap! Try using yahoo on your cell phone, it sucks and display marketing is in a bubble right now - expect a market correction after the dust settles down on all these deals.
Hey Michael,
Aren’t you the pundit here who should be making predictions rather than asking us?
Huh? you get paid the big bucks so show us some value dude. after all, we (through our visits and seeing your ads) pay your salary!
Too many idiots here. Techcrunch sucks too!!!
I got yer “tiny yahoo share” right here, bub.
@30…You can’t possibly be thinking that YHOO and bebo are even remotely comparable, are you? A company that’s looking to acquire bebo has a completely different objective than a company trying to buy YHOO.
Once again readers often resort to emotional assesments if you don’t see that Yahoo is #1 in mail, #2 in search, #1 in news (?). I believe they’re in the top 3 for personals and autos.
And you suggest buying bebo instead? Bebo I’m sure is a great company with lots of value…but it’s apples and oranges.
fuck that 80 billion they better sell i’m a stock holder; even though i even think Yahoo isnt worth that much. For 80 billion why not buy something else or buy every startup out right now 80 billion is kinda absurd. Fuck that buy Sprint they’ll probably sell for 80 billion
If you want to run numbers and comparisons, how about this:
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.
Google is eating Yahoo’s lunch, so I don’t think it’s rationale to think that Yahoo’s stock would have been doing better over the year than Google’s, especially after its last earnings call.
Yahoo closed on January 2nd at $23.72. A 25% discount on its stock would put it at $17.79.
So, factoring in that Microsoft’s current offer for Yahoo is partially in Microsoft stock and partially in cash and that Microsoft shares closed Friday at $28.56, the current offer on the table for Yahoo comes in at $29.08, close to what Yahoo closed at on Friday.
So, the offer on the table, right now, still 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.
Reports abound that Yahoo is holding out for the $40 a share that they could have got last year from Microsoft. 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 come on, after the headwinds hit, how many of us really think that the investing public would have treated Yahoo the same as Google?)
Even a price of $35 a share would represent a premium of about 97%.
Right now, Microsoft shareholders are propping up Yahoo stock to the tune of about 61% and they probably aren’t going to be too happy to hold it up very long.
Be real interesting if Microsoft starts playing ball like Ellison and just drops Yahoo and lets their stock price sink back down. If you’re a Yahoo shareholder, that’s got to scare you right now. Google may be interested in trying to toe the antitrust line to save the enemy that it shot if by saving that enemy it can thwart Microsoft, but I’m sure Google would be content to just let Yahoo bleed out on its own if Microsoft takes its bandages and walks away.
totally agree with you. ms should stick to its successful core businesses, buy nothing in excess of $5B and leave jerry to face headwinds (and shareholder suits) for the next 100 days. In another 100 days, y will be begging for $19.
I think you meant Microsoft shares went down, instead of “Microsoft lost”, since no one took money from their pocket.
half of the fanatics here I think are msft employees trying to gorge up yahoo
Microsoft stock has plummeted because Microsoft Shareholders don’t like this deal. If this keeps up, it will be those shareholders rising up to hold MSFT’s board and CEO accountable for a scheme that wipes out their entire cashpile, puts them into debt, and wipes out 80 billion from their market cap. All this to realize 1 billion in cost savings? Ballmer — that’s nuts.
What’s interesting is that Yahoo’s board and Execs are standing firm together, and this past week, big announcements rolled out from Zimbra, Yahoo Music, Yahoo Live, etc. It seems like Yahoo is waking up again… maybe Jerry and Sue will finally deliver that vision that shareholders have been waiting for.
Goog should come in and just snap it up already
Yahoo have had more then enough time to try get more value out of their assets, but they could not and that’s why the stock was at $19 and heading south. They are silly to reject the MSFT offer.
On Monday, Yahoo’s stock will drop below $19 and then maybe MSFT can get them for an even cheaper price…….
Bad decision to reject the bid by yahoo for shareholders and employees alike. Are they too proud to be acquired by a huge software giant that has managed to weather the markets and competitors for 35 (?) odd years……..
Yahoo can learn a thing or 2 from MSFT, but looks like they want to join GOOG and continue to miss earnings (the post on search becoming a commodity was spot on)
Uhhhhh this was a dumb article. Lots of stocks corrected around that time. Heck look at google correction.
The whole market is down this past week. The Nasdaq lost 11% - I hardly think the entire Yahoo deal is to blame.. http://finance.google.com/fina.....amp;q=NDAQ
Search is nowhere near where it should be.
And the internet is nowhere near where it will be in 20 years.
So why buy Yahoo?
Because Microsoft thinks they can’t take on Google without Yahoo?
It’s ridiculous.
It won’t improve the search results, it won’t help the users.
Instead of buying Yahoo they should open up search, allow developers to improve the search results, to thinker with the algorythm, and I bet you will cause Google a headache worth more than $ 80 billion because the developers will make it better and where does that leave Google?
I bet there are some real annoyed investors that bought yahoo stock because of the sale and now are going to end up with a 15 buck share price when MS tells them to get lost.
How about leaving Yahoo in pain, and building some new networks with that money.
收购不是问题，整合才是问题。
Great post, good summary of how its going down.
As the dust is starting to settle this deal does not feel right for microsoft and for yahoo. it seems like oil and water. even if microsoft completes this transaction it would be very difficult to digest for them from a product and services standpoint as well as a financial standpoint.