Yahoo! Inc. (NASDAQ:YHOO)‘s stock price is picking up but that could be because of increase in demand from the new investors who see the company as a juicy acquisition target and a few moves away from check-mate. In his article on Business Insider, Nicholas Carlson wrote about how the large turnover rate in Yahoo! Inc. (NASDAQ:YHOO)’s stocks, as of late, could be interpreted in terms of an acquisition just around the corner.
There are two reasons according to Carlson that make Yahoo! Inc. (NASDAQ:YHOO) a ‘juicy acquisition target’, as he put it. Firstly it’s the valuation that the company has been getting from the stock market. It’s nothing short of ridiculous if you work out the numbers.
Carlson writes that the holder of all the companies’ fate, Mr Market, might be showing a little unjustice to Yahoo! Inc. (NASDAQ:YHOO) by valuing its core business at $0. From the aspect of generating cash, Yahoo! Inc. (NASDAQ:YHOO)’s revenues approximately stand at $5 billion every year which amounts to $1 billion in profits. In finance, there is a term for this phenomenon, arbitrage, and with numbers like Yahoo! Inc. (NASDAQ:YHOO), it is a fund managers dream to get a slice of this free money falling from the trees as it doesn’t involve taking any additional risks.
The money is just sitting there and Carlsson suspects that these arbitrage fund managers might be buying Yahoo! Inc. (NASDAQ:YHOO)’s stock in the hopes of an imminent transaction.
Secondly, there is another reason that might have set the arbitrage investors drooling. According to Carlsson its the hope of a perfect acquisition of Yahoo! Inc. (NASDAQ:YHOO). Perfect in the sense that it will be tax free. Carlsson points out that Yahoo has a sizable stake in both Alibaba Group Holding Ltd (NYSE:BABA) and Yahoo Japan, and if one of these companies were to acquire Yahoo, they would be able to incorporate Yahoo in themselves without paying a penny to the taxman.
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