Yesterday I said that Yahoo will close at 25. How did Yahoo do? It closed at 24.47 but it did touch 25. Pretty close considering that most people said it would close around 30% lower.
But Yahoo’s share fall was not as steep as the 30 percent plunge anticipated by some analysts, indicating there was still an “acquisition premium” built into the stock.
What was interesting was the volume. Yahoo traded with a 246 million volume on a normal day of 34 million volume. For reference, 246 million is about 17% of Yahoo’s total float.
This means there was some serious buying. Is this Microsoft buying Yahoo stock? I doubt it because that is not Microsoft’s style as it is too risky. If the shareholders of Yahoo are standing firm at 37 and Microsoft sees no room for maneuver then this is a very high risk maneuver that could cost billions on failure. Is it some outside party that wants to force the hand of Yahoo? Maybe, but again a too high risk for a potential failure.
What I sooner think is that it might be a defensive maneuver by Yahoo itself. Let’s say that you are Jerry Yang and completely convinced by your strategy how would you protect yourself? You would buy shares. After all if you are convinced of yourself this moment would seem like a buying opportunity, no? Sticking with insider trading rules it means around June 10 we will learn who did the buying. That is if it was an insider. For reference had all of the shares been purchased by an insider it would translate to around 5 billion. Not that big, nor that small.
Another factor to consider in this scenario is that if this is indeed an insider and these shares were to be removed from the market then the earnings of Yahoo will have increased by 17%. Though will the market to be fooled by this act?
So how does Yahoo move on? Will Microsoft come back to the table? NO! Put yourself into the context. Yahoo did not fall as much as analysts predicted, and thus one has to wonder if Yahoo management is laughing at Microsoft? On the other hand Microsoft is not laughing because their stock did fall even though it was supposed to go up.
Interesting now some of the stalwarts are talking:
Already, some Yahoo shareholders have started to make their discontent public.
Bill Miller, a portfolio manager for Legg Mason, Yahoo’s second-largest shareholder, told the New York Times in a Sunday interview that he would have considered selling to Microsoft for $34 or $35 a share.
While that was more than Microsoft’s offer, it was less than the $37 per share Yahoo’s board insisted on.
Bill, tough! You were greedy and it bit you! You know Bill had you talked a bit louder and not been so greedy you would have made some nice money. Now you are sitting on a at least a half billion dollar loss (CNBC stats)! Now I think Yahoo will start a slow downward grind and that half a billion will probably turn into 1.5 billion! How are you Bill going to explain that to your investors? Isn’t there a saying in the market that you should never have a winning hand turn into a loosing hand?