After Microsoft pulled their $47.5 billion takeover bid on Monday, shares of Yahoo plummeted more than 16 percent in late morning bidding, nearly wiping out half of the gains in the company’s stock price since Microsoft made its initial offer in late January. Yahoo has been holding firm in their assertation that Microsoft’s bid significantly undervalues the company, and Microsoft walked away from a deal on Saturday after it became clear they were not going to budge.
Analysts are optimistic that Yahoo shares won’t fall back down to their $19.18 pre-bid price. The logic here is that they believe some shareholders may still be hopeful that Microsoft will still come back at some point with an offer.
If Yahoo continues to take a beating, which is likely what Microsoft is hoping at this point, Microsoft may be able to eventually come back with that offer, or one even lower, and have Yahoo eagerly accept it.
Google may also make out pretty well on the news that Microsoft is withdrawing their bid. Not only does this appease their objections to the merger, but it could lay the foundation for a profitable long-term advertising partnership with Yahoo.
Yahoo CEO Jerry Yang is now decidedly on the hot seat. Having rejected Microsoft’s offer, Yang will have to deliver some real results or he may face being replaced. Alternatively, if he can’t get things turned around at Yahoo, he may be forced to accept a lower bid from Microsoft.