Among other things, that ends a three month stock party where the market value of Yahoo jumped from about 26.2 billion to nearly $40 billion based on Microsoft’s offer to acquire Yahoo for $31/share on February 1.. That run up included a 7% gain in Yahoo’s stock price on Friday alone, based on market anticipation of a negotiated deal that would be announced on Monday.
That party began the day after Microsoft made an offer to acquire Yahoo for $31/share on February 1.
Here’s what to expect now that Microsoft has withdrawn their bid:
Unless Yahoo pulls a very large rabbit out of a hat prior to trading on Monday, expect their share price to decline significantly. Yahoo has put in place a number of very expensive anti-takeover provisions and employee retention programs that the markets will factor in now that the Microsoft share price crutch has been removed. Also, their Q1 financial results, while above expectations, were not so materially positive as to offset the hit they are going to take.
In a nutshell, Yahoo’s scorched earth strategy worked. Now they have to live with their victory.
Google was the big winner in a Microsoft/Yahoo acquisition attempt, no matter what the outcome. But among the possible outcomes, a broken Yahoo and a frustrated Microsoft almost certainly result in increased market share for Google.
Don’t Count Microsoft Out Just Yet
There’s a reasonable chance that Yahoo tanks this week – really tanks. It’s not inconceivable that Microsoft could come right back to the table with a lower bid than the one they just pulled off the table. Don’t count Microsoft out yet – they may still get their win.