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Yahoo shares plunge as Microsoft drops bid

05/05/2008

Shares in Yahoo slipped as much as 20 per cent on Nasdaq following Microsoft's announcement it would abandon its bid for the internet search engine.

Yahoo fell $3.96 (£2) to $24.71 (£12.53) at 12:12pm in New York, 17:12 BST and earlier its shares fell as slow as $22.97 (£11.56), the biggest decline in two years.

Microsoft dropped its bid for Yahoo after the company's executives would not accept $33 (£16.74) a share for the company, valuing Yahoo at $44.6 billion (£22.63 billion).

The software giant originally offered $31 (£15.33) a share, raising it to $33 (£16.74) when its April 26th deadline passed without comment.

The board was holding out for $37 (£18.77) a share, but Microsoft finally walked away on Saturday.

Yahoo may look for another partner to increase its value for shareholders. The company has already struck an advertising deal with larger rival Google.

Yesterday, Yahoo chairman Roy Bostock said: "From the beginning of this process, our independent board and our management have been steadfast in our belief that Microsoft's offer undervalued the company and we are pleased that so many of our shareholders joined us in expressing that view."

Mr Bostock added that Yahoo is "executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market".

The decision not to accept the deal will put pressure on Yahoo to improve its share price as stockholders may sue if they believe the board was not acting in their best interests.

Shares in Microsoft rose by 2.6 per cent today, while Google shares rose 2.2 per cent.