Yahoo shares plunged by upto 5% in after market trading this afternoon on rumors that Microsoft may be ready to quit its takeover offer for Yahoo.

From Reuters:

Microsoft Corp is evaluating its bid for Yahoo Inc because the Internet company may have lost value since it made its offer, a person familiar with the matter said on Friday.

Microsoft has been repeatedly trying to engage Yahoo’s board in discussions, the person said. But the market has deteriorated and changes in Yahoo’s business may have dragged down its value below what it was when Microsoft made its bid, the person said.

Could Yahoo have missed its once in a life-time exit, or is this simply a negotiating tactic with Microsoft trying to force Yahoo’s hand?

Microsoft stock traded up just shy of 1% on the news in late trading.