Filed under: Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO)
After Microsoft Corp. (NASDAQ: MSFT) announced it was withdrawing its offer for Yahoo! (NASDAQ: YHOO) I thought that Yahoo stock would end today at $19 — which is where it traded before the deal was announced. But Yahoo is currently trading over $24.
Here are three reasons that Yahoo may be trading $5 above where it was pre-Microsoft:
- Google Inc. (NASDAQ: GOOG) deal. Investors are ascribing some value to the possibility that Google will sell some of Yahoo’s search advertising;
- Short covering. Investors who bet on the deal falling apart may be covering their short positions in Yahoo — keeping a floor beneath its stock price;
- Still in play. Microsoft may buy up a control position in Yahoo at the current market price and return to negotiate a Yahoo takeover at a lower price.
One thing seems likely to me — investors are not piling into the stock because they believe that Yahoo has some money making strategy up its sleeve that will accelerate its earnings growth. But I hope for Yahoo shareholder’s sake that I’m wrong.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
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