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“Why did Yahoo stock feel to a 5 year low?

Many factors are involve in this huge drop in Yahoo’s stock price. For examples; the recession we are in, the bear market but in my opinion, the big factor is the deal with Microsoft that didn’t go through is the main factor that caused this huge drop in stock price for Yahoo. Let’s Imagine that you are an investor and you have about 1,000 shares of Yahoo at let’s just say $20 a share. That’s $20,000 worth. Now Microsoft is offering to buy that $20/share for $31/share. That’s a 55% increase for the stock. That’s $11,000 more that you could have in your pocket. Yahoo rejected that offer and the $33/share offer by Microsoft. As an investor you must be feeling like the Board is not acting in your best interest. We can also make a claim that since Jerry Yang is the founder of Yahoo, he doesn’t want to loose his “baby”. We call this the principal agent problem. In this example the agent (Jerry Yang and the Board at Yahoo) are acting in their best self interest instead of what is best for the shareholders. Yes, it’s possible that the shareholders has asymmetric information and that the Board has information that can prove that Yahoo is worth more then $33, but these are all speculations. Now the speculators are stabbing yahoo right at the heart. People are selling off the stocks and are angry that Yahoo didn’t take the offer by Microsoft. Speculators are feeling that the board are losing control. Unless Yahoo has a big deal coming up with Google or the market turns into a bull market, expect Yahoo’s stock price to stay in the teens.

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