From the Department of Correcting "Crazy Google/Yahoo Rumors"
Re: Wacky–even by Google standards–stock market schemes
Google (GOOG) –let me get this straight–is apparently considering buying just under 20% of Yahoo (YHOO) shares at some elevated price, according to a post on TechCrunch yesterday, “although the goal isn’t so much to close the deal, which would almost certainly be opposed by U.S. regulatory agencies. But rather to throw another curve ball at the Yahoo Board…”
Excuse me for a second, as my brain just exploded. While I don’t doubt TechCrunch had a good source on this report, it just goes to show the level of kooky desperation and out-of-control emotion that Microsoft’s (MSFT) unsolicited bid for Yahoo has had on all the parties involved.
Were Google to actually take wacky advice like this, I would worry about more than its recent stock drop. Such a move is neither savvy nor effective (after all, Google cannot shimmy its way out of the fact that it just really just cannot have Yahoo, in whole or part, because of its huge market share in search and search advertising).
Why? It just makes me a little nervous if Google, a major U.S. corporation with lots and lots of government rules and regulations to follow, is contemplating “pretend” buying of shares of Yahoo to trip up rival Microsoft, as if it were a kid playing a stock market equivalent of Ding Dong Ditch (see helpful video below on how to do a successful DDD).
Quoting an anonymous adviser to the deal, the TechCrunch post noted: “It’s a relatively cheap way for Google to confuse the situation further, and, potentially delay or disrupt a Microsoft acquisition.”
Well, if $10 billion or more, along with inevitable shareholder lawsuits, is cheap, I guess so!
OK, not so much. But the scheme concocted by anonymous wheelers and dealers sure wins points for being interesting. And creative. I might even say: crazy like a fox.
But let’s just stick with crazy, shall we?
For a little better take on the situation, try the excellent (and, more importantly, accurate) analysis of the stock situation around the deal by The Wall Street Journal’s Matthew Karnitschnig of the Deal Journal blog posted yesterday too, which I post in its entirety below (also, a picture of what Microsoft might look like if it manages to swallow Yahoo whole):
Yahoo’s Deteriorating Defenses Against the Microsoft Bid
Like a coiled python eyeing its quarry, Microsoft appears content to wait for Yahoo to exhaust its defenses before moving in for the kill.
To understand Microsoft’s sanguine approach, look no further than Google’s share price. Until Microsoft made its offer for Yahoo on Jan. 31–-then valued at $44.6 billion–-Google and Yahoo were both down about 18% on the year. Yahoo has jumped about 50% since the offer; Google has fallen a further 16%.
Part of Google’s slide is connected to concern that a combined Microsoft/Yahoo would cost it business. Still, investors appear most worried about a decline in Google’s advertising revenue. Those concerns sent its shares to a nine-month low Tuesday.
One needn’t be a certified financial analyst to surmise that were it not for the Microsoft bid, Yahoo, which faces the same challenges in the marketplace as Google, also would be getting thrashed in the stock market.
If Yahoo shares suffered the same percentage decline as Google’s have since the Microsoft offer–not an unfair assumption considering Google stock rose 12% in the 12 months before the offer and Yahoo’s fell about 35%–then Yahoo would now be trading at about $16. That is about half of Microsoft’s original $31-a-share offer, which Yahoo dismissed as “undervalued.”
If Google’s stock keeps dropping, the Yahoo board might want to solicit a new valuation. Because if Microsoft does strike, the attack is likely to be unrelenting. Microsoft won’t crush any bones, but its objective is the same as the African python’s: to swallow its prey whole.
Please see this disclosure related to me and Google.