YHOO Stock: Is Verizon Reconsidering the Yahoo Deal?

Verizon reportedly getting “cold feet” following Yahoo's disclosure of a data hack.

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Shares of Yahoo Inc (NASDAQ:YHOO) fell $0.29, or 0.70%, at $43.39 early Friday morning following a report from The New York Post stating that according to sources Verizon Communications (NYSE:VZ) is seeking a billion dollar discount on its pending $4.8 billion acquisition of Yahoo’s core assets after recent news of email hack as well as government-direct email scanning.

“In the last day, we’ve heard that Tim Armstrong, [Verizon/AOL boss] is getting cold feet. He’s pretty upset about the lack of disclosure and he’s saying, ‘Can we get out of this or can we reduce the price?’,” one of the sources told the publication.

Armstrong, who obviously feels Yahoo’s value has diminished as a result of last month’s disclosure of a data hack, flew to the West Coast to meet with Yahoo executives in recent days to “hammer out the case” for a price reduction, one of the sources told the Post, adding that the Yahoo-deal team and CEO Marissa Mayer are “trying to protect shareholders” by pushing back hard against any attempt to negotiate the price down. They insist that a deal is a deal and that the telecom giant can not legally change the terms.

The Post notes however, that the discussions are ongoing and that the $1 billion discount sought by Armstrong would come on top of a potential $1 billion legal reserve that Verizon may set aside to fund potential legal issues associated with the recent Yahoo email hack.

Former interim Yahoo CEO Ross Levinsohn told CNBC on Wednesday, “If I am sitting at Verizon right now…just from a business standpoint, I would probably reserve a bunch of money against the deal or go back to Yahoo and ask for a discount.”

Verizon’s discount request comes on the heels of the web portal getting hammered by bad news in the past few weeks.

Yahoo confirmed last month that in late 2014 it had been hacked and that personal data of more than half a billion users, including their names, email addresses, phone numbers and encrypted passwords were stolen. Then later this week it was revealed that the embattled company had cooperated with the U.S. government by building surveillance tools, granting U.S intelligence agencies unprecedented access to “hundreds of millions of Yahoo Mail accounts”.

These stories are the main reason why Yahoo shares have lost more than 2.50% of their value since the beginning of last month. The stock however, has advanced 15.74% in the past three months and 31.33% since Jan. 1. Over the past 5 trading sessions YHOO has gained 2.61%.

Yahoo Stock Action

Yahoo began trading on Friday at $43.26 to close at at $43.22, or 1.05% lower from the prior days close of $43.68. On an intraday basis ticker got as low as $43.12 and as high as $43.68.

On Valuation measures, the $41.29 billion market cap Palo Alto, California-based company has a median Street price target of $44 with a high target of $55. Of 31 analysts who follow the stock 13 rate it a ‘Buy’, and 18 others rate it a ‘Hold’. No analyst rates the name a ‘Sell.

Yahoo is up 37.06% year-over-year. Shares of New York-based Verizon closed down 0.68% at $49.92 on Friday.

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