Yahoo shares tumble as investors fear Verizon acquisition trouble

Yahoo shares tumbled 6% on Thursday as investors feared that the latest Yahoo hack could spell bad news for its sale to Verizon.

This is the second major hack revelation in recent months and there’s speculation that Verizon could be spooked. Some are wondering if Verizon will ask for a discount on the $4.8 billion deal or scrap it altogether.

TechCrunch is owned by Verizon, but we do not have inside information on the latest deal conversations. (We’ve reached out, but haven’t been given a comment).

What we do know is that, regardless of the hacks, Verizon has been interested in Yahoo for strategic reasons. There’s a lot of overlap between its business and Verizon-owned AOL. Both have built robust content and adtech businesses. And they can combine forces with their legacy email and search categories.

After the first big Yahoo hack was unveiled a few months ago, there were reports that Verizon would demand a $1 billion discount. In an October earnings call, Verizon CFO Fran Shammo said they were “still evaluating what it means for the transaction.” But we have not been given any reason to believe that the deal was no longer happening.

Should the latest hack change things? Well, it’s certainly not a good look for Yahoo.

In an era where we have foreign governments meddling with our national elections, the world has been reminded of the importance of email security. If the breach leads to a significant number of users fleeing Yahoo, then this makes it a less attractive deal.

Verizon execs have a fiduciary duty to investors to make sure that they are completing an acquisition that they believe is good for the company’s stock. They will likely be weighing whether the damage to Yahoo’s brand is enough to hurt its growth potential.

One could also expect that Verizon executives would want to be certain that Yahoo didn’t withhold information about the hack in the deal negotiations. If Yahoo knew more about the breach than they let on, Verizon would have an especially good reason to ask for a discount. A betrayal of trust would not be a good way to start the new relationship.

A Yahoo spokesperson told us that “we are confident in Yahoo’s value and we continue to work towards integration with Verizon.”

Additional reporting by Ingrid Lunden