Yahoo! Shares take a Dramatic Plunge as Microsoft withdraws Bid!

May 6, 2008 | 2,647 views | by Navneet Kaushal
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Yahoo! Successfully avoided the jaws of Microsoft, but found itself drowning in the share market. Microsoft had to withdraw its takeover bid for Yahoo! as the latter had asked for a higher price of $37 a share against Microsoft's final bid of $33 a share. But this deterrence didn't give Yahoo! CEO Jerry Yang any opportunity to smile. Barely 48 hours had passed since the Microsoft withdrawal, when Yahoo's shares took a
steep dive
and took a massive fall of 15% .

This drop was more than enough to negate nearly half of the gain that Yahoo Inc. had recorded since Microsoft's initial bid on January 31st 2008. Yahoo's market value has crumbled down by almost $14 billion compared to Microsoft's final bid of $47.5 billion. During Microsoft-Yahoo! negotiations, Yahoo's shares were close to $28.67 a share. After Microsoft's withdrawal, Yahoo! shares took a hit of $4.30 per share and closed at $24.37 a share at the closing of Monday's trading session. Microsoft's shares had a minor decline of 16 cents or 0.6% closing at $29.08.

In our post yesterday, I had mentioned that if Yahoo! continues to struggle, there might be a possibility of Microsoft taking a go at it again. This is exactly what many analysts are speculating. Furthermore, it is a common belief that, Yahoo's shares won't go to the low of $19.18/share which was the pre-bid price.

On the other hand, the one entity that gained a lot from this fiasco is Google. As the trading day ended, Google's shares had jumped up $13.61 a rise of 2.3% to close at $594.90. Google had been playing behind the scenes in this entire saga, as it managed to forge an alliance with Yahoo! and simultaneously managed to break Microsoft's grip on Yahoo!.

Standard & Poor's equity analyst Scott Kessler said, "This squarely puts the pressure on Jerry Yang to deliver results and shareholder value. You are going to see a lot of shareholders just throwing in the towel because they are going to realize it's going to take awhile for the stock to get back to where it was Friday."

Darren Chervitz, co-manager of the Jacob Internet Fund (Yahoo! Stockholder) said, "Clearly there's frustration. I am not even sure if Yahoo cares about its shareholders because they didn't show much regard for shareholders' best interests in this process."

Defending the rejection to Microsoft's offer, Yahoo! CEO Jerry Yang said, "We clearly indicated to Microsoft that we were open to a transaction but only if it were on terms that fully recognized the value of Yahoo and was in the best interests of our stockholders."

This is now a desperate situation for Yahoo! (CEO) Jerry Yang (39), who would now have to take steps towards massive damage control. He would also have to convince Wall Street that his move of rejecting Microsoft's bid was a smart one and that he would be able to turn this entire thing around.

Till then, Yahoo! and Jerry Yang's future hang in the balance.

4.thumbnail Yahoo! Shares take a Dramatic Plunge as Microsoft withdraws Bid!

Navneet Kaushal

Navneet Kaushal is the founder and CEO of PageTraffic, an SEO Agency in India with offices in Chicago, Mumbai and London. A leading search strategist, Navneet helps clients maintain an edge in search engines and the online media. Navneet's expertise has established PageTraffic as one of the most awarded and successful search marketing agencies.
4.thumbnail Yahoo! Shares take a Dramatic Plunge as Microsoft withdraws Bid!
4.thumbnail Yahoo! Shares take a Dramatic Plunge as Microsoft withdraws Bid!