Check out this article in Silicon Alley Insider by Henry Blodget
Remember when Yahoo haughtily rejected Microsoft’s $31 per share offer for the company as “massively undervalued”? Those were the days.Yahoo closed at $18.75, it’s lowest level in five years. For those who don’t care to recall, that’s below where it was trading when Microsoft hand-delivered the gift of a lifetime to the battered Board’s door.
Here’s Yahoo’s chart for the past 2 years. Note that it’s traded above $31 for a maybe a month or two during that entire period.
And if you want to remember what Yahoo was telling investors back in March, when the stock was around $30 because of the acquisition offer, here’s my post that includes the full PowerPoint of their investor presentation.
Frankly, I think that too often ego / politics / religion gets in the middle of what should be relatively straightforward business decisions. Simply put, if it’s March, 2008, you’re Yahoo, and someone’s offering you $31/share when you were trading at less than $20, you need to do a classic decision tree analysis:
- Create multiple scenarios for the future, and the stock price implied by them assuming normal ratios
- Assign realistic probabilities to those scenarios
- Get an expected value for each one
My hunch is that when you do that for Yahoo, in the “everything goes perfectly” scenario you might justify a stock price of $31 two years hence. But when you factor in the probability of that scenario occurring, I’m pretty sure the inexorable conclusion is sell.
1 response so far ↓
1 Anonymous // Sep 3, 2008 at 4:52 pm
If one wants to be particularly cynical, consider the disconnect between action of greatest benefit to shareholders and the action of greatest benefit to executive management. Yang is an exception here, except that he has enough money already, so that ego becomes a more important consideration.
It’s rather sad that some of the best compensated people are incompetent CEO’s of large companies. Once you reach that point, you just ignore the shareholders and hang on for dear life, pilfering whatever money you can from the company. It’s happening not just at Yahoo!
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