Shareholders start to file case against Yahoo
February 13th, 2008 by Sita | No Comments »Yahoo’s board and users may not like microsoft. But yahoo’s shareholders love microsoft for sure. Since yahoo’s board has rejected microsoft’s offer, shareholders are starting to file case against yahoo.
Why are the shareholders so upset?
Before microsoft made the offer, yahoo’s shares were trading at 19$. So the 31$ offer by microsoft is almost 60% premium on the market price. More importantly yahoo has lot of cash on its balance sheet. The cash is equivalent to 12$ per share.
Now the market price of a share (19$) = cash on balance sheet (12$) + value of its operations. So the value of yahoo’s operations was only 7$. Since no one pays a premium for cash, you can safely assume that microsoft is offering 19$ per share for yahoo’s operations. That is almost 200% premium over the last market price. Is it any wonder that yahoo’s shareholders are so upset?
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