Yahoo shares plummet

Market reacts badly

5 May 2008 20:10 GMT / By Stuart Miles

Shares in Yahoo have plummetted today following the decision by Microsoft to pull its offer for a takeover.

Shares fell by $5.36 to $23.31, a fifth of their value, and well below the $33-per-share offer that Microsoft had originally offered within minutes of New York's stock market opening.

The share price, which has not risen back up to around $24 (at time of writing), will no doubt, critics say, put pressure on Co-founder Jerry Yang to justify why he turned down a premium of 70% from Microsoft.

On Saturday, Microsoft announced it was to withdraw its plans to buy Yahoo even though analysts believed it would launch a hostile takeover for the company.

The software giant, who has been actively trying to buy the search engine over the past 3 months cited that it believed that Yang, "would take steps that would make Yahoo undesirable as an acquisition for Microsoft".

Steve Ballmer, chief executive officer of Microsoft made the comments in an open letter published on the Microsoft website.

"Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo! has not moved toward accepting our offer. After careful consideration, we believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal", Microsoft said.