Just for fun, I bought a few shares of Yahoo this morning. This is the first time I’ve purchased an individual stock in about 8 years, but the stock has dropped to $24 after Microsoft pulled its $33/share buyout offer off the table.
When the deal was first announced, YHOO jumped to $29 and I decided not to buy since I’d only get a 14% return if the deal was consummated. But at $24, I’ll get a 40% return if a deal goes through — plus this price protects my downside if a deal doesn’t happen.
YHOO was trading at $19 before the MSFT offer, so $33 represents a 74% premium for shareholders. I believe it was a breach of fiduciary duty for Jerry Yang and the Yahoo board to turn down Microsoft’s offer. Microsoft just pulled the offer on Sunday and already shareholders are crying foul. I think there’s a good chance that MSFT gives YHOO one more chance and the deal gets done.
[UPDATE: At the end of trading, I’m up 4.2% and rumors are circulating that Yahoo may re-enter negotiations with Microsoft]