A few weekends ago, I asked the following questions:
– What are Yahoo (YHOO) shares actually worth? Both now, and 3-5 years from now?
– When Yahoo’s stock gets whacked due to Mr. Softee’s walkaway, does this create an opportunity?Indeed, if Microsoft (MSFT) believed Yahoo was worth $33, wouldn’t that imply the company has a value above
the January 31 pre-bid price of $19 ?
– The key is whether there are any other bidders lurking put there.
Well, via CNBC, the latest rumor broke today about another bidder– Carl Icahn — as much as 50 million shares. Its helped rallied the markets nicely off the lows (other than that, there’s not a whole lot else going on)
Paul is having none of it, and instead suggests a Yahoo-Build-A-Rumor sort of thing . . .
>
UPDATE: March 13, 2008 4:54pm
WSJ is now reporting this as true: Icahn Enters Microsoft-Yahoo Fray:
Billionaire investor Carl Icahn has amassed a stake in Yahoo
Inc. and is leaning toward launching a proxy contest to unseat at least
part of Yahoo’s board, according to one person familiar with the
situation.Mr. Icahn bought roughly 50 million Yahoo shares since Microsoft
Corp. on May 3 withdrew its unsolicited offer to buy Yahoo, the person
said. Mr. Icahn is expected to decide Wednesday whether to launch a
proxy contest — a Yahoo deadline for board nominations looms Thursday
— and he currently has no assurances from Microsoft it would
reconsider a Yahoo purchase. The person said that Mr. Icahn was unsure
whether he would nominate a full or partial slate of candidates to try
to replace Yahoo’s 10-person board. A shareholder vote on any such
nominees would take place at Yahoo’s annual shareholder meeting on July
3.
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Previously:
What Is Yahoo Actually Worth ? (May 4, 2008)
http://bigpicture.typepad.com/comments/2008/05/what-is-yahoo-a.html
Was a Private Equity Bid for Yahoo Thwarted by Microsoft ? (February 11, 2008)
http://bigpicture.typepad.com/comments/2008/02/private-equity.html
Barry, OT, but did you see this?
http://nationaleconomist.com/blog/2008/05/13/the-power-lunch-where-they-planned-the-take-down-of-bear-stearns/
I thought the value of a Company was related to the profits it is and will be making.
Buyout for Yahoo? Oh wait it’s options expiration week!
I thought that kind of junk was illegal. Oh that’s right someone would have to be prosecuted and we don’t do that to wall street.
Every transaction that does take place we see massive call buying before the news comes out, but we never see an investigation.
Indeed, if Microsoft (MSFT) believed Yahoo was worth $33, wouldn’t that imply the company has a value above the January 31 pre-bid price of $19 ?
Maybe. The whole point to a buyout price is that it’s higher than the current price (because otherwise who would sell to you) and it’s lower than what the value of the acquisition will be bringing to your company what with synergies and the like. Or something like that. My point being that maybe Yahoo is only worth $19 on it’s own, and that Microsoft sees some totally awesome way in which Yahoo will add insane amounts of value as a part of the collective.
Or Microsoft could just be wrong, there’s always that.
Actual conversation I had a few months ago:
Me: So, you gonna bite on the Yahoo deal?
Director of Research at Major Mutual Fund that is one of YHOO’s largest shareholders:
Meh, Microsoft will pay more, it’s just a question of how much.
Me: Okay. We’ll see.
DirRe: You don’t think so.
Me: I wouldn’t. Yahoo is a dog (foolishly ignorant of the fund’s position in the stock). I wouldn’t pay $20/share, much less $30.
DirRe: [Visibly annoyed silence, complete with scowl, then] We’ll see.
No I-Banker worth her salt could in any way justify paying anything more than mid single digits for Yahoo stock, and I defy any equity analyst any where to present a cogent explanation that justifies a mature Internet company beind destroyed by Google and others being worth 36x earnings.
What has happened, is that on one hand, you have a techy guy running rough-shod over his finance department, only to have the board ultimately say “NFW” in no uncertain terms, and on the other, institutional shareholders who’ve forgotten that GARP doesn’t involve investing in non-dividend paying, high P/B, high P/E low cash-flow companies that are destined for the status of also-ran within a decade, and probably much sooner.
Problem is you cannot go hostile with Yahoo. The sum of the company is the people and the IP and it walks out the door every night. MSFT made the right (and only choice).
Icahn’s method is different and that lead to some positive outcome.
Finally, everyone forgets that YHOO owns 60% of Yahoo-Japan which is both Yahoo and Ebay (and broadband provider) in the worlds #2 economy. So when you do a DCF this is a big missing piece.
Most small investors aren’t aware that you cannot buy more than 15% of a public corporation’s common stock without SEC approval. So much for the “free” market. A “so called” hostile bid isn’t hostile from the SEC’s point of view. All this stuff about poison pills and whatnot disguise the horribly corrupt gaming of large stock portions by insiders with connections at the SEC. Surely some of you have heard something about this. Would anybody care to shed some light on all those innocent lambs manning the corporate boards?
Nah. There are no such things as conspiracies in corporate boards. After all, it’s really so terribly, awfully hard to keep a secret that no one would dare do something illegal.
It’s only worth what you can sucker someone else to buy it for, just like bubbled housing.
Stay away from Icahn he’s a disaster. I don’t know how he made billions. It must be by luck because lately anything he touches blows up.
Fidel:
I would suspect based on the success of Barry’s business, his “bearish thesis”, as you put it, is actually money MAKING one. Otherwise, he would be out of business.
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BR: Fidel has been sent back to Cuba, where he awaits a meeting with his maker . . .
YHOO will be part of MSFT in 2 years, max.
Depending on how both companies perform and the amount of stock in the deal it could be anywhere between 30 and 35.
There are no other bidders at the moment. Carl will wage the publicity and proxy war so MSFT and Bill Miller don’t have to get their hands dirty. This is what Carl’s fund does.
YHOO will do a deal or ICahn will push for a new slate and force a deal.
I thought this was an interesting take on what had looked like a crazy ego stoked deal:
What Microsoft wants from Yahoo
http://www.techuser.net/microsoft-yahoo.html
by Usman Latif [Jul 07, 2008]
The article argues the point that the key to the deal is the old overture patent that yahoo got when they bought them up. The one covering the pay per click search engine market.