Yahoo shares slipped today after a report that potential bids for the company’s core assets won’t be as high as most have been expecting. Citing unnamed sources, The Wall Street Journal reports that Verizon and others are expected to bid between $2 billion and $3 billion.
Yahoo’s core worth less than half what was thought?
Verizon is believed to be the leading bidder in the auction for Yahoo’s core ad business. Other bidders include private-equity firms, and the newspaper reports that some of these private-equity bidders are expected to come in toward the low end of the range. The same sources said that last month, people who were “close to the process” believed Yahoo’s core assets would sell for $4 billion to $8 billion. The WSJ reports that bidders have been reducing their expected bids after attending weeks of sales presentations, which only heightens the concern about just how bad things might be at the struggling Internet firm.
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According to The Wall Street Journal, the company could still see a few bids higher than the $2 billion to $3 billion expected range. Further, interested parties typically downplay their interest when entering a bid for a company. The media outlet’s sources also said that it’s possible not all of the bids will be for all of Yahoo’s core business and that it’s likely the bids will have different structures.
According to USA Today, SunTrust Robinson Humphrey analyst Robert Peck noted that it’s unclear exactly what all is being bid for. Among the possible assets that could be included are the core ad and search business, Tumblr and Yahoo Sports, but the final bidding price depends just how many of those assets and which assets are sold.
Investors were disappointed last month when management didn’t have much of an update on the bidding process along with the company’s earnings report.
Bid deadline for Yahoo approaching
The sources also reportedly said that the company has indicated a deadline within the first week of next week for the next bidding round to be complete. However, they said it’s unclear if it will be the last bidding round or whether there will be another.
Among the parties reportedly taking part in the bidding process for Yahoo are TPG, a firm that often does buyouts, and a consortium of investors which includes former CEO Ross Levinsohn, Vista Equity Partners and Bain Capital. Quicken Loans founder Dan Gilbert is also said to be among the interested parties, and it’s been reported that Warren Buffett may be backing him.
What is Yahoo really worth?
Some investors have been pushing Yahoo to sell its core business for quite some time, especially since management retreated from their previous plan of spinning off the company’s stake in Alibaba and Yahoo Japan. Because of these stakes, it’s extremely difficult to slap a valuation on Yahoo’s core business.
Shares of YHOO declined to as low as $36 during regular trading hours on Friday before bouncing. As of this writing, the stock is down 1.03% at $36.64 per share.