Microsoft's Yahoo bid losing its appeal

 

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Posted on 7 Feb 2008 at 08:22

Microsoft's takeover bid for Yahoo is becoming less attractive as time goes on, according to Silicon Alley Insider.

Since Microsoft first offered the takeover deal to Yahoo on Friday, its stock has dropped by nearly a tenth, due to investors' concern over the potential effects of the move.

Yahoo is still considering the deal, which stands at $44 billion in a combination of cash and Microsoft stock.

However, because the deal stipulates that stock options will be given based on their value at market closing on 31 January, the real value of the deal decreases along with Microsoft's share price.

If the trend of falling Microsoft share value continues then the deal will become less attractive for Yahoo as time goes on.

"Microsoft shareholders are already unhappy with the proposal - and they're only going to get more unhappy as the deal gets more expensive. The more unhappy they get, the more the stock will drop, and the more the stock drops, the more expensive the deal will get, and so on," suggests Blodget.

Microsoft announced this week that it would probably take on its first ever debt, as a loan would be necessary to fund the takeover.

Author: Matthew Sparkes