Valleywag
What is Yahoo really worth? That's the $44.6 billion question, the one that ultimately split Steve Ballmer and Jerry Yang. Most pundits predicted Yahoo's shares would drop precipitously today, perhaps as low as $19, where they were trading before Microsoft's offer. Instead, they're trading around $24.60 — a 14 percent drop, but a 30 percent premium to the pre-Microsoft price. The shares could drop further over the course of the day, but it's worth asking what's sustaining Yahoo's shares at this level right now.
It could be stock-market arbitrageurs who believe that Ballmer's walk-away was just a negotiating tactic. (Silicon Alley Insider finds this scenario unlikely.) Or it could be optimism about prospective profits from a deal to outsource Yahoo's search advertising to Google, though that deal has yet to be announced, let alone proven to work.
But there simply may not be enough people selling to take Yahoo's shares lowers. The buy-and-hold investors who were holding out for a price in the high 30s would be hypocritical to sell now. If the mutual funds who own so much of Yahoo really think Yahoo was worth that much, oughtn't they be buying? (Chart by Yahoo Finance)
Comments
The market responds to earnings reports above all else. When the next quarterly results come in Yahoo probably will hit $19. I mean, they can't sell Alibaba every quarter, can they?
Jerry Yang- The Emperor has no clothes
There is probably some optimism that Yahoo management will respond to this kick in the pants in some creative way. It will probably take a few weeks for that optimism to wear off. But it will.
Maybe Wall Street still thinks the Google search deal is on.
Nope, none of those things, Owen. The stock is doing "well" because of short-sellers covering their positions today.
@kouroshk: That's as good an explanation as I've heard -- but if true, shouldn't the support be short-lived?
@Owen Thomas: This is not a result of the short sellers. There is no need to buy to cover today. If you were smart enough to short prior to today you can happily sit on that gain as long as you want. There might be some people who went long on Yahoo last week that just realized they made the biggest mistake of their soon-to-be-over investing careers. So those guys are taking their losses and heading for the doors (but that's bringing the stock down). Why the stock didn't drop past a 15% loss? Attribute it to programmed trading that kicks in when a stock drops past a threshold. There is a small percentage of speculators out there that just don't get how screwed up Yahoo is, and a 15% discount in a single day is too good to pass up for them. Once the earnings come out next quarter even these guys will have moved on.
@WagCurious:
really? can you seriously think that so many people are unaware of the yhoo/msft issue that they let "programmed trading" invest their money in something you thin is so clearly a loser? Maybe their experts should call you each morning for advise?
there's something big in the works -- the second shoe here is yet to drop.
@fogcat5: I'm saying 15% is 15%. Not much on this planet moves 15% in a day. There is a lot of analysis that says once a stock has taken such a pounding it will recover a small amount the next day. Regardless of what the stock is. This is technical trading, not trading because some other shoe is out there. And look at that, YHOO is up 4.47% in the first hours of trading. So yeah, feel free to call me for advice (or "advise", whatever that is).
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