But with a market cap of $33 billion (minus $2 billion in cash) that doesn’t leave many potential buyers with enough market cap to swallow Yahoo. All the buyers/partners that are big enough, like Microsoft and Google, are already competing with Yahoo, so they aren't really buyers. I think the sale could happen, but at a lower price. A potential sale/merger puts a floor on the stock, but I don’t think it provides much upside.
Disclosure: I am long YHOO and MSFT. I am short 25 and 35 strike calls on YHOO.
This is an actual conversation I had with the most prolific blogger I know, Felix Salmon. He has been churning out material about the JPMorgan takeover of Bear Stearns. He helped me better explain why Bear Stearns was trading over the JPM buyout price of $2.00 a share. He used our discussion to produce a well thought out explanation of how Bear Stearns equity might function as a CDS proxy .
My position disclosure at the time of this writing is at the bottom of my blog entry.
neubert (11:41:39 AM): fun day yesterday.
felix (11:42:01 AM): hoo yeah
felix (11:42:09 AM): do you still have your BSC @ $7?
felix (11:42:19 AM): I hope you didn't take my advice to sell @ $4!
neubert (11:42:31 AM): sold calls on at struck at $10 for $2.25.
felix (11:43:04 AM): when?
neuber (11:43:25 AM): just now
felix (11:44:04 AM): expiry?
neubert (11:44:12 AM): oct and april
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