We are pleased to say that dozens of readers have played our Microsoft-Yahoo Deal Price Game (thank you!). We now have a big enough sample size (see all the bets here) that we thought it was time to revisit the current betting line.
At what price per share do SAI readers think Yahoo will eventually agree to be acquired by Microsoft?
This is an increase in value of about $5 from the current offer, which is now valued at $28.70. It’s also a couple of dollars above where Yahoo’s stock price ($28.50) is suggesting the deal will be consummated.
The stock market appears to be expecting a Microsoft bid increase, but only to about $31 per share–the original deal value.
How do we know this?
Because Yahoo’s current stock price includes a time/risk premium to account for the facts that the deal might not happen and will take a year to close. This time/risk premium is probably at least $2 a share. Yahoo’s stock, meanwhile, is trading only 20 cents below the current bid value. This suggests that arbs are looking for an increase in the bid of at least $2.
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