OT/Interesting articles on Yahoo/News Corp from Street Advisor:
streetadvisor.com
Yahoo/News Corp. Presents an Intriguing Non-Merger Scott Greenberg
Feb 29 2000
It's a merger in rumor only, but the market is already pooh-poohing the potential alliance between Yahoo (Nasdaq: YHOO) and News Corp. (NYSE: NWS). The concerns are the same as with the AOL/Time Warner deal: multiple contraction and slowed growth. Indeed, these issues would affect a Yahoo/News Corp. marriage more dramatically. Here's why:
News Corp. has even slower growth than Time Warner, and Yahoo?s multiple is higher than AOL?s. So, a merger would theoretically represent an even more drastic contraction for Yahoo?s valuation multiple. This is why Yahoo and Jerry Yang are being so careful in the structuring of this ?alliance?. Yang has said explicitly, ?Yahoo wants to partner with old media outlets, but it was not interested in a merger.? Nevertheless, Yahoo was down $6 Monday and News Corp. was up $3 7/8 on reports of his meetings with Peter Chernin, News Corp?s number two executive.
The speculation is that if an agreement is reached at all, it will not be until April. If that is the case, one way investors can potentially profit from this transition period is by shorting Yahoo ? and to have both sides of this ?non-arb, non-merger? deal, getting long on News Corp.
If Yahoo has a decline similar to AOL?s 33% retracement after the merger with Time Warner, then Yahoo could trade as low as $112 per share. The other side of the transaction, concerning News Corp, would indicate a 35%, or $71 per share. This non-announcement, non-deal, non-merger might represent an opportunity to short one of the highest of the high-flying Internet stocks in a period of increased volatility. Or it could allow a patient Yahoo to get in on an Internet leader at a discounted price.
streetadvisor.com
Short Yahoo, Long News Corp. Scott Greenberg
Mar 2 2000
The ?short Yahoo (Nasdaq: YHOO), long News Corp. (NYSE: NWS)? arb we recommended earlier this week continues to work like a charm, even in the face of all-time highs for other Internet stocks and the Nasdaq. Yahoo?s weakness in this incredibly strong market reinforces our belief that while the company pursues an alliance with News Corp. its stock will remain under pressure.
Only when Wall Street has greater visibility into this ?partnership? -- and that could be as late as April -- will it be easier to determine the impact on Yahoo?s market multiple. We know what happened to America Online (NYSE: AOL) when it announced a deal with Time Warner (NYSE: TWX), and the market is showing signs of discounting Yahoo in a similar manner.
Keep an eye on America Online and Time Warner and how the stocks perform. In the meantime continue to short Yahoo and be long on News Corp. until we know how deep this intended agreement could go.
AS A YAHOO! LONG, I WAS NOT TOO PLEASED WITH THESE ARTICLES -- BUT THIS IS NOT THE YAHOO! THREAD. |
