Yahoo Inc.’s stock sunk to its lowest level in nearly five years Thursday, magnifying the challenge facing the Internet company as management tries to justify its rebuff of Microsoft Corp.’s US$47.5-billion takeover bid.
Shares fell as low as $17.81—a price unseen since October 2003—before bouncing back to $17.92, still down 84 cents, or 4.5%, in early afternoon trading.
The downturn left Yahoo’s market value about $12 billion below what shareholders would have received if the company had accepted Microsoft’s takeover offer of $33 per share in May. Microsoft sweetened the offer after Yahoo repeatedly rejected an initial bid of $31 per share made in January.
Yahoo’s demands for more money eventually drove Microsoft away, angering many shareholders now worried that the company won’t be able to push the stock price back above $30 any time soon.
If Yahoo shares remain in a funk, some analysts believe the company’s board will be under increasing pressure to replace co-founder Jerry Yang as chief executive.
Yang, who also sits on the board, has already pledged to increase Yahoo’s net revenue by at least 25% in each of the next two years—a goal that has been greeted with widespread skepticism. Yahoo’s net revenue rose 11% to $2.7 billion during the first half of this year.
Two former CEOs joined Yahoo’s board last month as part of a settlement with disgruntled shareholder Carl Icahn, who wanted the company sold to Microsoft. Icahn also recently joined Yahoo’s 11-member board.
In a vote taken at Yahoo’s annual meeting last month, nearly 34 per cent of shareholders opposed Yang’s re-election, while nearly 40 per cent wanted chairman Roy Bostock bounced from the board.
Yahoo is hoping for a major lift from rival Google Inc., which plans to start selling ads alongside some of Yahoo’s search results in October. Yahoo estimates Google’s superior technology will boost its annual revenue by $800 million.
