Yahoo has the option to sell up to 160 million shares of Alibaba now plus they own 16 percent of the company on top of that. At the current price they would be able to raise approx. 8.5-9.5 billion today and their remaining 16 percent stake is worth 36-38 billion.

Yahoo has a market cap of 40 billion and makes about 1.3 billion in net profit per year as a stand alone business. Assuming Yahoo could be liquidated for 10 billion as a stand-alone company and adding in what they could sell all of their alibaba stake for as of today. That puts their liquidation value at a minimum of 50-60 billion or about 50 percent above their current stock price.

You are way way off on this and it is discussed regularly in the trading thread.

It's just basic math though. The stock they own is worth more than their entire market cap. They sold 120 million shares today in the IPO and they own about 404 million more. BABA shares are trading at 92.14 each.

120 million x 92.14 = 11.04 billion

404 million x 92= 36.7 billion approx

Total: 48.1 billion
Market cap of Yahoo(YHOO): 40.1 billion

20 percent discount to book value not including any other assets. They own an 8 billion dollar stake in Yahoo Japan also which brings the total to 56 billion. They have over 1 billion in cash on the balance sheet. Even if you think Yahoo America is worthless that's still a 40 percent discount to book value.

If it were basic you wouldn't be this far off. For example you didn't even include taxes. They have to pay 35% on the proceeds from the IPO at 68/share, and also if they were to sell the remaining 16%. They have to pay taxes on Yahoo! Japan as well. Go ahead and wipe 35% off all your valuations. Like I said this is all discussed repetitively in the trading thread.

Secondly your initial post values YHOO's core business at $10B. That is extremely far off. In fact the market has valued YHOO core to be worthless for a long time now. There are risks the company faces in how to use its capital. It has notoriously floundered around despite having major windfalls. It has stopped growing while other companies are seeing record growth. I do think it's worth more than nothing or negative, but certainly not as high as $10B, and furthermore it doesn't matter what you or I think it should be valued at. It matters what the market thinks it should be valued at, and right now it doesn't have a lot of faith and it's easy to see why.

The major reason they are selling what they are selling is because they have to get their share of the company down to 12 percent because they have a deal with the founder of the company. After what they have sold today they have it down to about 16-17 percent.

The reason that the book value is not showing up on their balance sheet was because they used the equity method to account for the value of Alibaba. That caused it to be significantly undervalued on their balance sheet. According to an article I just read they had their entire 24 percent stake in the company valued at just approx 550 million as recently as 2013. There are a lot of valid reasons to do the accounting that way. Tax purposes and overvaluation are the major concerns I assume.

Now that the IPO has happened and they have converted 140 million shares into actual cash that can't help but change their book value. Cash in hand is a mathematical fact and not an illiquid asset sitting on the balance sheet like before. The accounting treatment of their remaining stake must be changed now also because of the IPO.

They currently trade at a 3.3 multiple to book value. If you add the proceeds from the IPO to the asset side of the ledger it doubles their tangible book value even after accounting for the tax hit.

As of last quarter they had 7.6 billion in net tangible assets. It's a mathematical fact that that number will increase by at least 6 billion when they report earnings again.

The money has to go somewhere. They will probably announce a very large additional share buy-back. If I were her I would be drooling at the chance to buy back her own company below book value.

The first tranche of shares were sold at $68, the IPO price, and you aren't accounting for taxes.

But it does bring to mind that the assumed taxes and tax rates that are priced into the stock represent somewhere in the neighborhood of $15 a share. That is hilariously high, and an opportunity for a foreign company.

I agree. I think she might do a small-ish acquisition, but I think (and hope) that the lion's share of the first tranche of IPO proceeds are going to go towards share buybacks. In fact, if they were smart about it, they should start it like immediately while the share price is deflated.

FThey interviewed the CEO of SoftBank and asked him whether acquiring Yhoo was a possibility: he had a nervous laugh and said "that is a dangerous question" while pointing two fingers at the interviewer. Also seems there were rumors that yahoo might acquire aol which might explain why it ended down yesterday,

However I don't see more than 5 percent of retail investors who would think "oh the vast majority of yahoo market cap is now worth 35 percent more, time to sell / short". yesterday's moves with Yhoo is most probably a slam dunk case for how big financial institutions manipulate markets but it will never be brought to the public eye along with the countless other felonies that occurred during the crisis that not one person was incarcerated for.

Also what's funny is now people like OP are using book value to calculate valuation of a tech company while alibaba itself just ipo'd for 28 times sales or something like that. No need to mention the other hundred names that are also trading at ridiculous valuations. OP you should do an analysis using industry averages as well and see what that should mean for Yhoo share price. I am sure that would be hilarious

The valuations are definitely aggressive. If the alibaba share price holds up or even increases it's correct to see it as an arbitrage situation because Yhoo could actually liquidate and realize their entire stake in Alibaba in cash. Yeah they take a tax hit etc.

It's difficult to see how the market could have it right here. It's worth a minimum of 70 imo because of the break-up value. Someone could buy the company and break it up and realize 80-100 per share if they were intelligent about how they went about selling the pieces.

The market is definitely out of whack though.

You're saying Yahoo is worth 80-100 billion to a company who buys it and breaks it up?

Yeah the market is super efficient. What a joke today.

You have a company sitting on 400 million shares of alibaba that they could sell in the market and receive 36 billion dollars in CASH. They just sold 120 million shares with proceeds of about 9 billion dollars in CASH. They have 1.4 billion net cash on their balance sheet. They own stock in Yahoo Japan that they could sell in the stock market and receive 8-9 billion in CASH. Their core business makes 1.3 billion dollars per year in net profit AFTER taxes.

36
09
1.4
08
------
54.4 billion CASH on the balance sheet for a company trading with a 38.44 billion market cap.

But wait it gets even juicer than that. The company has a cost of revenue that is only 25 percent of their total 4+ billion in yearly revenue. To put this in perspective AOL has a cost of revenue above 75 percent, less than half have the yearly revenue of Yahoo, and less than 1/10th the net profit and has a 3.3 billion dollar market cap.

The Yahoo core business generates 1.3 billion dollars in net profit AFTER all taxes and expenses. Just because their core business isn't growing at double digits does not mean there is anything wrong with their business. They are still making a lot of money. There is no way a tech company that makes over a billion dollars a year should have its core business discounted to worthless just because growth has leveled off. Frankly, it defies common sense how the market is treating Yhoo. Tech companies that lose money and grow revenue get 20x sales multiples but a company that makes over a billion dollars a year is worthless because it can't create a new and higher revenue number fast enough for traders and the media to blow out of proportion. This mentality is idiotic. So let's give it a ridiculous General Motors or Alcoa like multiple of 8x earnings. So add 10.4 billion valuation on the core business and now the number moves up to 64.4 billion.

So wait is there anything left? Yes, there is. You have to add in all the other NON-CORE assets that they own that they could sell for cash. For example, those 37 companies they just bought. Or their 20,000 domain name portfolio. How about the hundreds of discontinued software features they own the software to? At least another 5-10 billion more in CASH. Probably a lot more than that.

their core business does nowhere near 1.3 billion in profit. it took me about 4 seconds to go to sec.gov and lookup their 10-k to see the mistake you made, though I had guessed it before hand

I don't think the OP has even read their income statements, and he/she continues not to include taxes on their equity interest valuations. I'll make it easier for you to see how much money they are making.

Income before income taxes and earnings in equity interests:
This is each quarter starting with Q1 2013 and ending at Q2 2014.
203,042 160,585 98,129 171,527 16,726 24,848

For Q3 2013, Q4 2013, Q1 2014, and Q2 2014 combined, Yahoo's actual core profit is $311.2M during those 12 months, pre-tax. If you take the first 2 quarters of this year, they are at a whopping $41.6 million.

Specifically, the income you are trying to include your Yahoo valuation is not at all relevant. Their latest 10-Q filing (and all previous) clearly state:
Furthermore, YHOO is not growing and has an extremely low PEG, especially on a comparable basis. You continue to be way off, and I encourage you to maybe take some finance courses and practice reading earnings reports so that you can understand them better.

I made a mistake by characterizing their reported net profit numbers as being completely attributable to their core business. Even so when you strip out earnings from their equity stakes it only devalues the profitability of their core business in a technical way for accounting purposes.

You can see the evidence for that in the financial statements you are referencing. Core profitability is what is important. Gross profit and how they allocate for their operating expenses. If you notice they are spending over a billion dollars per year in research and development that could be declared as net profit if the company made a decision to stop funding it.

So your defense of your outlandish numbers is to have yahoo stop spending on R&D? You're right, doing that, and looking at them compared to other tech companies makes them the profit winners! Who cares if basically every other tech company makes a huge profit and has a massive R&D budget to continue growing, Yahoo can stop funding future growth and make money right now to increase their long term shareholder value! Pitch this to someone and let me know how it works out.

Here's what I have for YHOO liquidation, worst case scenario aorn:

Core Business 6b
IPO proceeds after 35% tax: 5.5b
Yahoo Japan after 35% tax: 5.5b
Cash net of liabilities 1.5b
post-IPO @ 90 after 35% tax = 23.78b

42.28b, or about 42.50 a share.

Lots of potential there above that "worst case"...the core side of the business could see renewed growth; there are tax minimization strategies possible; and/or the value of the Alibaba share price could grow.

The downside risk would be a collapse in Alibaba's shares. Don't think the core business would be much of a downside risk in that worst case scenario because it's already pretty damn cheap. I mean just looking at their balance sheet, they are valuing their brand & property alone at $6b, let alone accounting for future profits.

Realistically, I think someone would be willing to pay closer to $10b for Yahoo core. Hundreds of millions of eyeballs, a global brand name, and lots of potential cost savings if you integrate their products and cut out a lot of the overhead.

If Yahoo is bought, I think the likeliest scenario is a dual buyer. Silver Lake teaming up with Microsoft or Alibaba teaming up with [insert private equity]. In fact, googling it, it appears both of these were being considered in 2011: http://dealbook.nytimes.com/2011/11/...ype=blogs&_r=0

In the first scenario, Microsoft & Silver Lake take Yahoo core, plan on selling off the rest. In the latter scenario, private equity takes Yahoo core, goes private with it, and Alibaba takes back itself at a heavy discount & takes a stake in Yahoo Japan at a heavy discount. Softbank could also do this route, which would supplant their holdings in Yahoo Japan, Alibaba, and gives it further entry to the US at a cheap cost.

The deal makes so much sense at the current share prices that it is an inevitability that SOMEONE will look into doing it.

Except several very important facts.

#1 Yahoo cant actually sell 400M+ shares at $90/share exactly, and furthermore, investors won't like getting taxed at 35% for that + a percent for a special dividend payment.

#2 Yahoo, in current market conditions, is not to be valued at a "sum of parts" valuation. For some reason everyone here thinks that is how every stock should be valued, but stock valuations, even in the most basic mathematical calculations, account for more than just that. Yahoo is expected to not grow. Them owning equity with a value you put on it, is not a positive for them given their past and even their current management's inability to do much of anything. Imagine if you expected to make less and less money over time, and you had $1M in the bank. Are your prospects, on a comparable basis, very good? Would you say you are better off than a peer growing their income in the double digits with $0 in the bank? The answer is obviously no and no, and it's actually not even close.

#3 Finally, investors do not want to buy a tech stock that is not growing, has very low margins, makes far less per employee than basically any successful tech company there is, and has a history of massive failure. Equity returns are pretty damn high currently, and the market is in a "return chasing" state, as most major tech companies are achieving record growth, record profits, and record returns. YHOO fits the bill on exactly none of those. Once again, investments are only worth what an investor is willing to pay, and in this case, YHOO core is worthless comparing it to other investments, and its entire value is propped up by assets and BABA.

The sooner people can come to terms with how equity valuations, and the market itself, actually works, the sooner we can move on from this. I suspect OP won't ever come to terms with this though as he/she seems foolishly bullish despite ridiculously incorrect numbers let alone even considering or accepting the rest of the facts.

Not sure why you're on a high horse when you're making the same types of selective picking-and-choosing arguments that the OP is making. Your points are pretty terrible and self-serving. What number in that list are you taking issue with?

#1 The chance of it being taxed at the full rate are near 0%. I'm merely illustrating a worst case scenario. The CFO already said they'll try to minimize the taxes. Some companies are able to push through equity sales with 0% in taxes, and we already know the shares are in Hong Kong where the capital gains rate is 0% so they're halfway there. It is within the realm of possibility that their stake will be worth the full value of 90 x 403.

#2 There is no right or wrong time for a sum of its parts valuation. People buy stocks or sell stocks for that reason all the time. Your entire #2 case is basically "hurr durr they're going to waste all of the money." That's a case for better management or an activist investor to get involved, not a case against a company's current breakup value, a number that you are choosing to ignore.

#3 Quite frankly, who cares if the company is growing or not? The core is such a small factor in the stock that it barely even matters whether they're shrinking revenues by 10%, growing revenues by 0%, or growing revenues by 10%. The fact of the matter is that the core business is profitable. They have minuscule amounts of debt. There's no red flags there. Their growth rate is a difference of hundreds of millions in a company worth in the tens of billions.

We'll see where the stock goes. Once the short-term BABA volatility weeds its way out of the stock, I think it is a near certainty (1) it is going to approach it's worst case value and/or (2) other companies are going to take a long look at acquiring Yahoo because the break up value is so high. The value is simply too compelling to ignore.

What about YHOO itself borrowing say 15-20 billion and announcing a really gigantic share buy-back? Maybe if they force down the share count it will move the share price to where it should be by leveraging the value of the Alibaba and Yahoo Japan stakes to take advantage of the low interest borrowing environment. It would probably help them for tax mitigation too.

Yahoo needs some expert advice on how they can maximize shareholder value in the situation. The media is kind of having a field day crapping on the company.

The CFO said they won't make their tax strategies public ahead of time. Presumably to prevent any loopholes being closed before they are executed. They've likely been working on this for years.

Yeah...I think they might use most of the rest of the initial funds from the IPO to buy back shares. Something around a $4b buyback if they can avoid taxes on the other half. They don't really need the cash for acquisitions, because they will be able to borrow very inexpensively against their equity should an attractive acquisition present itself. And given the current undervalued price of the stock, a massive buy back a big win for the company and the shareholders.

I'm not even a long term Yahoo bear at all. I was the person who initially came up with a bull thesis on 2p2. The problem was that OP did a calculation that brought the valuation to $69.4B to $74.4B. This was very far off and I stated why.

#1 I'm actually not sure why you're stating that my statements were selective picking and choosing. You refuted my tax statement (which is the current known tax Yahoo would pay) by saying they may be paying a lower tax. They didn't do this in the previous BABA sale, and including a current valuation based on an uncertain assumption is not a current valuation.

#2 My entire #2 case is actually that they aren't growing. If you want to throw a "hurr" in there, be my guest.

#3 The most basic method of stock valuations still includes an investors required rate of return on the investment they make. If all of YHOO's peers are massively outperforming it, YHOO needs to be really cheap to entice an investor, regardless of sum of parts.

Agree they are way undervalued.

In at 38.76

What are the specific legal/regulatory limitations on when and how many of the shares they could buy-back? It's definitely something I wish I knew more about.

The key overall questions are these imo:

1. How can they avoid maximum taxation on their (baba) share sales?

2. How many shares can they buy back immediately?

3. If they have a limit on how many they can buy without announcing, how many will or should they buy?

4. What is the minimum offer that the board and shareholder's would/should accept? (I think the optimal offer for an acquirer to make is 65 per share and Yahoo should accept it)

5. Who are the potential buyers? (This is the situation where Microsoft should make its move. Amazon could make an out-of-left field bid for a lot of very good reason. For maximum shareholder value an LBO deal is probably best. It's so ideal for them and juicy.)

OK this is a summary of the recently amended SEC share buy-back rules:

1. The company is harbored from liability only for common stock purchases.

2. It can't buy stock in approx. the first half hour or last ten minutes of trading, depending on its market capitalization. Highly liquid stocks with large market caps have the fewest time-of-day limitations on when they can buy back stock.

3. The company does not have to publicly disclose that it is buying back shares.

4. It can buy up to 25 percent of the average daily trading volume per day. This number is calculated by taking the average daily volume over the preceding 4 weeks.

Conclusion: Yahoo can immediately be buying-back about 10 million shares a day, 400 million dollars per day.

Here are the actual regulations:

mended Rule 10b-18 Safe Harbor

Because a company's stock repurchases can influence the market price for the company's common stock, they may raise concerns about market manipulation. Rule 10b-18 provides a safe harbor for bids for, and purchases of, common stock made by the company itself and "affiliated purchasers"16 if specified manner, time, price and volume conditions are met.17 Rule 10b-18 is a day-by-day safe harbor, meaning that the four conditions apply on a daily basis and that the failure to meet any one of them will disqualify all repurchases from the safe harbor for that day.18 Only repurchases of common equity securities (i.e., a company's common stock or an equivalent interest, including a unit of beneficial interest in a trust or limited partnership or a depository share) are eligible for the safe harbor.19

Rule 10b-18 has essentially been unchanged since the SEC adopted it in 1982. Since that time, the securities markets have grown considerably in size and complexity as evidenced by the proliferation of alternative trading systems, such as electronic communication networks, the continued globalization of securities markets and increased opportunities for after-hours trading. The amendments update the rule's purchasing conditions to address these developments.

Manner of Purchase. A company and its affiliated purchasers cannot solicit more than one broker/dealer to make repurchases.20 The purpose of this condition is to avoid the appearance of widespread interest in the stock that might occur if the company and its affiliated purchasers solicited multiple broker/dealers. The amendments clarify how this condition applies to repurchases made through electronic communication networks (ECNs), like Archipelago and Island, and in after-hours sessions.21 An ECN that is registered as a broker/dealer has the potential to act in a dual capacity – that of a broker/dealer when companies place trade orders directly with the ECN and that of a trading market.22 If a company places a repurchase order with a traditional broker/dealer and that broker/dealer accesses the liquidity of an ECN to make the repurchase (i.e., buys the stock on the ECN), the ECN is not acting as a broker/dealer and is not counted toward the one broker or dealer limit. In addition, the amendments clarify that a company can make repurchases using a different broker/dealer for after-hours repurchases than it used for normal trading hours.

Price. Repurchases cannot be at a price exceeding the highest independent bid or last independent transaction price, whichever is higher. The purpose of this requirement is to prevent a company from leading the market price for its shares above the price set by independent market forces. The amendments simplify the pricing condition by making its application more uniform and clarifying how this condition applies to after-hours trading.23 Where a company looks to find the highest independent bid or last independent transaction price depends on how transactions in the repurchased security are reported in the marketplace:

for securities reported or quoted in the consolidated system, the highest independent bid or last independent transaction price is as reported or quoted in the consolidated system;24
for securities not reported or quoted in the consolidated system, the highest independent bid or last independent transaction price is as displayed and disseminated on any national securities exchange or on any inter-dealer quotation system that displays at least two priced quotations for the security at the time of the repurchase;25 and
for all other securities, the highest independent bid is determined by obtaining bids from three independent dealers.
With respect to after-hours trading, repurchases cannot exceed the lower of the closing price of the primary trading session in the principal market for the security and any lower bid or sales prices subsequently reported in the consolidated systems by other markets.

Timing. Repurchases cannot occur as the opening transaction reported in the consolidated system or near the close of trading because trades at those times tend to have a disproportionate influence on the direction of trading.26 Previously, no Rule 10b-18 repurchase could occur during the last 30 minutes of trading, regardless of the liquidity of the market for the security being repurchased. The amended timing condition permits repurchases of securities that meet certain liquidity requirements until 10 minutes prior to the scheduled close of trading. To qualify, the stock must have an average daily trading volume during the four weeks prior to the repurchase (ADTV)27 of at least $1 million in value and a public float value of at least $150 million. Repurchases of all other eligible securities must continue to adhere to the 30-minute limit.28

In addition, repurchases cannot occur as the opening transaction of the after-hours session, but may occur until the termination of the period in which last sale prices are reported in the consolidated system. For after-hours trading, the rule's volume calculation carries over from the regular trading session.

Volume. Repurchases cannot exceed 25 percent of the ADTV during the four weeks prior to the week in which the repurchases occur. The purpose of this restriction is to prevent a company from dominating the market for its securities. Previously, "block" repurchases were not subject to this 25 percent restriction.29 As a result, companies could make unlimited block repurchases under the safe harbor. The rationale for excluding blocks from this 25 percent limit was a belief that block trades were less likely to influence trading prices than repurchases of the same number of shares through a series of smaller transactions over a period of time.30 However, block repurchases by a company were required to be subtracted from the ADTV when calculating the 25 percent limit for non-block repurchases.

Subject to the "one block exception" described below, block purchases now must comply with the 25 percent limit and are included in the ADTV when calculating the 25 percent limit. The SEC cited concerns that the block exclusion under old Rule 10b-18 was, in effect, eviscerating the volume condition since today about half of all purchases on the exchanges are block purchases. However, a company may make one block purchase each week regardless of size, provided no other Rule 10b-18 purchases are made on that day. Thus, alternatively, once each week a company can purchase one block of its common stock in lieu of purchasing under the 25 percent limit for that day. Block purchases made in reliance on this provision are excluded from the four-week ADTV.

In addition, the amendments provide that in the trading session immediately following a market-wide trading suspension, a company can repurchase 100 percent of the ADTV of its securities. This change is consistent with the special timing rules applicable to repurchases after a market-wide trading suspension.

Repurchases Pending a Merger or Acquisition

Together with the new treatment of block repurchases, the most significant change to Rule 10b-18 relates to repurchases while a merger or acquisition is pending. Under old Rule 10b-18, repurchases were not eligible for the safe harbor if made "pursuant to a merger, acquisition, or similar transaction involving a recapitalization."31 This provision was often referred to as the "merger exclusion" because it excluded from the safe harbor repurchases made "pursuant to" an M&A transaction. Though the SEC had never provided any formal guidance, many companies had always narrowly interpreted this exclusion to deny the safe harbor only to repurchases that were specifically made as part of an M&A transaction, but had thought that repurchases made outside of the terms of an M&A transaction were eligible for the safe harbor.32

The amendments significantly restrict the safe harbor during the pendency of a merger or acquisition by eliminating the "pursuant to" element of the merger exclusion, as it was understood by many companies. The amended safe harbor is unavailable for repurchases made following the public announcement of a merger, acquisition, or similar transaction involving a recapitalization, until the closing or, if earlier, the vote on the transaction by target stockholders.33 This exclusion is applicable regardless of the size of the transaction and whether the company seeking to make repurchases under the safe harbor is the acquiror or target. The SEC stated that after a merger is announced there is a heightened incentive to manipulate market prices, which justifies limiting the availability of the safe harbor during such times.34

Two important exceptions exist:

A company may use the safe harbor after announcement of a transaction if its repurchases in any single day do not exceed the lesser of: (1) 25 percent of the four-week ADTV for its common stock or (2) the company's daily average Rule 10b-18 purchases for the preceding three months. Accordingly, if a company made no repurchases in the three-month period prior to the merger announcement, then the company would not be able to make any repurchase under the safe harbor. If during the three months prior to the announcement, the company made block purchases in compliance with the amended Rule 10b-18 volume condition described above, then the company could make post-announcement block purchases of the same size and with the same frequency.35
The safe harbor is fully available during the pendency of purely cash transactions where there is no valuation period. In other words, a cash-only transaction without a valuation period will not itself trigger the merger exclusion.
Regulation M, Rule 10b-18 and the Merger Exclusion

Regulation M under the Exchange Act is designed to prevent a company from manipulating the price of its securities when the company is making a distribution of its securities.36 It prohibits bids for, and purchases of, a company's securities by the company or any of its affiliated purchasers during the period commencing prior to the company pricing a securities offering and ending after the distribution of securities has concluded. For securities offered in an M&A transaction (i.e., a merger in which the acquiror is using its shares as consideration), the restricted period under Regulation M commences on the date the proxy solicitation or offering materials are first sent to stockholders and ends on the date of the target stockholder vote or the expiration of the offering.37 Regulation M only prohibits bids for, and purchases of, securities being distributed (i.e., acquiror shares), not target shares.38

The Rule 10b-18 safe harbor has always been unavailable for repurchases during any restricted period under Rule 102 of Regulation M.39 The significance of the modified merger exclusion is that it makes the safe harbor unavailable at an earlier time in the M&A process (i.e., public announcement)40 and, unlike Regulation M, does not appear limited to repurchases of acquiror stock.41 Following the public announcement of an M&A transaction, the safe harbor appears to be unavailable for repurchases of target stock by the target and by the acquiror if it is an "affiliated purchaser" of the target.42

As a result of the modified merger exclusion, companies with active M&A programs may find themselves in overlapping periods where Rule 10b-18 is unavailable or only partially available based on pre-announcement repurchase activity. A company in such circumstances may want to consider whether repurchasing within the standard 25 percent volume limit (but in excess of its actual daily average repurchases over the preceding three months) would have a manipulative effect on the trading prices of its shares. While the SEC stated in the Adopting Release that there is heightened incentive for manipulation after the announcement of a merger, it also stated that an issuer is free to repurchase its securities, although not in reliance on the safe harbor, between the time of the announcement of a merger or other covered transaction and beginning of the Regulation M restricted period tied to the proxy mailing. As with any non-safe harbor repurchase, there is no presumption of manipulation.43

Historically, however, most companies have been reluctant to purchase outside of the safe harbor.

Effective Dates

The new disclosure requirements are effective for Form 10-Qs and Form 10-Ks filed for fiscal quarters ending on or after March 15, 2004. Accordingly, public companies that have a calendar year-end and that make repurchases during the first quarter of 2004 will need to comply with the new disclosure requirement in their Form 10-Q for the first quarter, which is due in May 2004. 44

The amendments to Rule 10b-18 are effective for repurchases occurring on and after December 17, 2003.

Conclusion

In adopting the new disclosure requirements, the SEC responded to increased investor interest in company repurchase plans and the repurchases, which are made or not made, pursuant to such announced plans. The amendments to Rule 10b-18 update the safe harbor for today's securities markets. The amendments regarding block repurchases and repurchases pending certain M&A transactions, however, significantly reduce the availability of the safe harbor.

Nobody is going to pay $65 a share for Yahoo. I think IF it's acquired, and I may be completely wrong in thinking there is interest there, you'd likely see somewhere in the neighborhood of a $48-$50 per share acquisition, which could be a win/win depending on the buyer. It depends on where Yahoo is trading.

Jack Ma and Masayoshi Son were interviewed on BABA's IPO date and neither one answered the question of whether they were interested in acquiring YHOO. That doesn't mean much, but it's at least slightly better than a straight up "no."

Well it's definitely not going to happen at 48-50 per share. They have too much defense in cash to take such a lowball offer seriously. If they take such a disrespectful offer they look like suckers and desperate.

Marissa Mayer, imo, isn't looking to appease traders by juicing up the quarterly results at the expense of the business. She believes in the company and she wants shareholders who believe in the company. If her only goal was to get the share price to 50, Yahoo wouldn't be investing so much in product development and future growth through acquisitions and investments.

A buyer has to make an offer that shows respect for the business and values it properly. This is especially true if the buyer has plans to break-up the company to extract the full value.

Pre-tax,post-tax, whatever. This company is sitting on a mountain of liquid saleable stock market investments that are worth over 40 billion dollars. How this transaction is financed and supported by business income is way more important to a buyer than having to pay an aggressive price.

It's not about what they want to pay or even what they should pay, it is about what they can pay and still be justified in making the deal.

They can pay 65 because:

1. The business is profitable enough to support paying debt if they borrow money to do it.
2. 75 percent of the purchase price is directly backed by marketable securities.