Goldman will have a piggy bank of more than $11 billion to dole out in bonuses at year’s end, and that is making the company sweat. I wonder why.
From Daily Beast:
How worried are Goldman Sachs executives about their ability to manage the coming media tsunami when bonus season comes around?
Paranoia might not be too strong a word to describe the mind-set. People inside Goldman tell me that some senior executives say they believe the onslaught of negative stories detailing Goldman’s manifold ties to upper levels of government, charges that it somehow fraudulently profited from the subprime crisis, and now the press about the firm’s record earnings is so out of proportion to reality that the coverage contains an element of anti-Semitism—subtly playing off the racist myth of a conspiracy of Jewish bankers controlling the world for their own benefit. (Goldman was founded by a Jewish immigrant, and after years of being run by Gentiles Jon Corzine and Hank Paulson, is once again run by a Jew, Lloyd Blankfein.)
(…)
One thing is certain: Goldman’s top executives might be getting much richer at the end of this year, but the firm’s reputation is sinking and may well sink further.
Consider this: Goldman produced record earnings in the second quarter, and if it just cranks out mediocre profits for the remaining two, Blankfein would be on course to receive a bonus of $50 million or more, according to people inside the firm.
This after Goldman was rescued from extinction (this is where I agree with the conspiracy theorists) nearly a year ago, when the financial crisis became most acute, with a $10 billion capital injection from the federal government, not to mention the tens of billions of dollars that flowed right to Goldman’s bottom line when the federal government bailed out AIG and honored all those insurance contracts Goldman held on its own portfolio of risky debt.
Of course, the flacks at Goldman would tell you that Goldman was among the first to repay its loan, and amazingly, they continue to spin that the firm wasn’t really bailed out when the Feds bailed out AIG. (Their rationale is too nonsensical to explain; trust me on this one, they’re full of shit.) Where they’re less full of shit on is the difficulties they face in dealing repairing the firm’s image.
Goldman also concedes that the recent attacks on the firm have hit home, particularly for Blankfein, after The New York Times reported that former Treasury Secretary (and former Goldman CEO) Hank Paulson spoke to Blankfein far more than any other CEO during the height of the financial crisis last year, suggesting that Goldman received preferential treatment. “Is Lloyd worried about our image? Nobody likes negative publicity. It’s unpleasant,” the spokesman says.
I don’t know… I am not always into conspiracy theories, but the fact that the Fed is stacked with former Goldman Sachs guys and Bear Stearns and Lehman Bros. were left to rot and take down the system, but then the Fed stepped in to save - amongst others - Goldman Sachs, you have to wonder, what else did Goldman expect? For Americans to joyfully sing in the streets?
Now that I’ve moved to NYC I get a vibe speaking to investment bankers that there was a sort of Goldman envy before the meltdown… and since the meltdown and “selective bailout”, that envy has turned to anger amongst regular people on Main street. I am all for capitalism and understand the intricacy of Goldman having repaid the loan, but I also understand why people will think: “once again, Wall Street reaps the profits while Main Street incurred the costs”.
Anyway, it will be interesting to see what, if anything happens once the news of the big bonuses hit the street.
I always wondered about what happens to your holdings when you accept a government job. I figured you had to sell them… but I did not know about the tax free loophole.
Henry Paulson sold his 3.23 million shares in Goldman, worth about $500 million at the time, when he took the Treasury job, according to regulatory filings. He was exempted from paying capital gains tax on the sale of those stakes under a rule meant to avoid penalizing wealthy people who take government jobs and are forced to sell assets.
Hmm… I think I need to get me a government job. Read more. On the one hand, it seems like a great way to avoid paying taxes (accept a government job even if your heart is not in it), it’s not, after all, like the government ever appoints unqualified people.
Update 1: More on Slate, and here is the government paperwork. I wonder if there’s an equivalent thing in Canada.
Update 2: Thank Goodness, it’s not an open-ended exemption, it’s simply a deferral: “the act lets you defer capital-gains taxes triggered by the transaction.” More interestingly, the Slate article was written in 2006 and suggests letting Paulson keep his shares, asking “what’s the worst thing that can happen”:
The most likely scenario is that Paulson will sell his Goldman shares and place the money in a blind trust. That would be a smart move, and a profitable one, since he’d gain some tax benefits. When you sell assets to conform to government ethics requirements, the U.S. Office of Government Ethics issues a certificate of divestiture that lets you defer capital-gains taxes triggered by the transaction. That will likely save Paulson several million dollars in the next few years. And when your annual salary is falling from $35 million to $183,000, every penny counts. The blind trust would also give Paulson an excuse to dump all his Goldman shares at once and diversify, just as things are getting choppy—something he couldn’t do if he stayed on the job.
Once he sells, Paulson—or whoever will manage his blind trust—will have a new problem. In order to qualify for the certificate of divestiture, the cash must be invested in a diversified fund, such as a stock mutual fund. But Paulson’s portfolio is so large that it doesn’t make sense to put it into a mutual fund, or even into a whole bunch of funds. A nest egg of this size should be broadly diversified—some real estate and a few hedge funds, a few private equity funds, commodities, stocks from all over the world, a private island or two. And of course, all of these have the potential to be affected by Paulson’s actions while he is in office.
Given recent activities in Washington, the notion of suggesting that we make exceptions to ethics rules seems highly dangerous. But here’s a bold idea: Maybe we should just let Paulson keep his shares. That would be the simplest and least costly thing to do—for him and for the government. The transparency provided by Goldman’s daily trading would act as a great inhibitor to favoritism.
What’s the worst thing that could happen if Paulson held on to his Goldman stock? It’s possible that a government in which the treasury secretary had a gigantic stake in Goldman might recklessly cut marginal income taxes on the very rich so that he and his fellow executives could keep more of their bonuses. Or he might push to cut income taxes on capital gains and dividends so that Goldman employees and clients would pay fewer taxes. He could help enact legislation to reduce and ultimately eliminate the estate tax so Goldman’s private banking clients would be able to pass on as much cash to their heirs as they want. Why, such an administration might run up massive deficits so that the bond desks of Wall Street firms like Goldman would have plenty of material to buy and sell! Oh, wait—the Bush administration has already done all that.
Judging by events that are unfolding this week, I’d say the answer to that question is a “flagrant conflict of interest”.
Tech Crunch points to a piece in the NYT on the loss of value of financial companies between October 9, 2007 and September 12, 2008, or roughly 11 months. Reading it, you can’t help but shake your head:
Citigroup: $236.7 billion to $97.8 billion.
Bank of America: $236.5 billion to $150.2 billion.
AIG: $179.8 billion to $32.3 billion
Goldman Sachs: $97.7 billion to $61.3 billion
American Express: $74.8 billion to $45 billion.
Morgan Stanley: $73.1 billion to $41.1 billion.
Fannie Mae: $64.8 billion to $700 million.
Merrill Lynch: $63.9 billion to $24.2 billion
Freddie Mac: $41.5 billion to $300 million.
Lehman Brothers: $34.4 billion to $2.5 billion.
Washington Mutual: $31.1 billion to $2.9 billion
In percentage terms, it is brutal:
Now the crazy part is that the broader stock market has not really woken up to this, and that spells bad news for the stock market. Bear in mind, much like the auto industry’s indirect impact on the economy is exponentially larger than its direct impact, the financial sector is pivotal to the economy. I’d say it is the industry with the greatest multiplier effect, and this effect is much sharper in downturns than upticks in growth. I remain convinced that some markets (be it sectors or geographies) will be less impacted, however, the fact that it is financial firms that are cratering, due to exposure to mortgages, is alarming. It’s one thing if financials crash due to risk mismanagement, but when it’s over mortgage risk mismanagement, expect chaos of gargantuan proportions.
Recall that in 2000, the Nasdaq imploded and took down the economy with it, this time around, the mortgage market crashed, and since these are not priced in real times, the shakeout is much less instantaneous, transparent, and seamless. I don’t think we’re feeling the full effects just yet. Don’t forget, these banks work with companies by lending and safeguarding their money, as such, layoffs as HP, eBay etc. are just the tip of the iceberg.
Nouriel Roubini, an economic guru I came across on Paul Kedrosky’s blog, has been apparently right throughout this tornado of crap and is pretty adamant that both Goldman Sachs and Morgan Stanley are next. Having studied finance, I must say, once he lays down his rationale as to why their business models are wrong, you tend to understand that indeed, they are doomed. This is why, to quote William Larkin, fixed income manager at Cabot Money Management in Salem, Massachusetts, “Goldman Sachs and Morgan Stanley are lining up dancing partners. They don’t want to be … this week’s victim.”
Sad, but true.
Not sure yet… but today might be bleak:
- Alan Greenspan: Economy in ‘once-in-a-century’ crisis
The U.S. credit squeeze has brought on a “once-in-a-century” financial crisis that is likely to claim more big firms before it eases, former Federal Reserve chief Alan Greenspan said Sunday.
Greenspan told ABC’s “This Week” that the situation “is in the process of outstripping anything I’ve seen, and it still is not resolved and it still has a way to go.”
“Indeed, it will continue to be a corrosive force until the price of homes in the United States stabilizes,” Greenspan said. He predicted that would not happen until early 2009, and said the odds of U.S. recession have gone up in recent months.
“I can’t believe we could have a once-in-a-century type of financial crisis without a significant impact on the real economy globally, and I think that indeed is what is in the process of occurring,” he said.
- Lehman Might File for Bankruptcy Manana
Lehman’s survival remains in doubt. The Lehman executive, who declined to be identified, said “this looks like the end.”
Lehman would be the biggest bank failure in 18 years. Note that earlier this year when Bear Stearns cratered, some people suspected Lehman Bros. was next, but a lot of people [smarter than me] said “it could not happen”. The Feds stepped in to save Fannie Mae and Freddie Mac, but after Barclay’s removed its offer and Bank of America began merger talks withMerrill Lynch, things started to look ominous.
A Lehman failure would have major, major repercussions… and might actually take down stronger players like Merrill Lynch (if it does not merge or sell before) and even a powerhouse like Goldman Sachs, hence why a 12th hour agreement remains possible.
Make no mistake about it, this helps no one, and that explains why banks are lining up to shore up competitors, to avoid a domino effect that could take down the entire financial system.
Some time ago I published a post called Financial Engineering: How to Triple Your Market Cap. I was referring to Marchex, a publicly traded company now worth less than $500M and founded by Russ Horowitz, founder of Go2Net, which merged with Infospace back in the day. But the strategy would apply to Marchex, as well as Name Media and any other owner of large domain name portfolio.
Anyway, the gist of that post was that Marchex - who was sitting on countless URLs and using them mainly for search marketing purposes - should bring those URLs to life by actually creating businesses, you know, websites with actual content and a purpose, instead of the kind with no content but only links to paid ads. Don’t get me wrong, the domain navigation business is lucrative, something I covered in Domain Parking Ecosystem here.
Marchex has not done that to date, neither has Name Media. One company that has, of course, is Demand Media. Demand was founded by Richard Rosenblatt, funded by big name investors, including Gordon Crawford (who is a major owner in Yahoo!) as well as Goldman Sachs. If Rosenblatt’s name is familiar, it’s because he was the executive that Intermix’ board brought in after Brad Greenspan was booted from the MySpace parent. It was Rosenblatt who struck the massive $580M deal with News Corp., creating Fox Interactive Media. Previous to that, Rosenblatt started iMall, which sold for an eye-popping $565M to Excite @ Home. You have to give a lot of credit to Rosenblatt who got into this particular space later than Marchex, Name Media et al., but has managed to build a company that in 2 short years has gotten interest from players like Yahoo! to the tune of $1.5B - $2B, according to Tech Crunch, who pegs Demand’s revenues at a healthy $250M and suggests that Rosenblatt is gunning for a $3B exit.
For the record: I am not arguing the merits of Demand Media’s business plan on a stand alone basis. The company is too complex, diverse and fluid for me to do that. I am, however, saying that relative to the Marchex or Name Media strategy, I prefer Demand Media’s. Then again, I am a content/sales guy, though I did work in the search industry back in the day.
I’d be surprised if Yahoo! acquires Demand Media, mainly because it is undergoing turbulent times and Yahoo! does not have that kind of cash on its books (as of its most recent quarter, it had $2.61B) and its stock is fairly volatile. Moreover, I see Demand actually as a buyer more than a seller. I can think of 3-5 more acquisition targets for the company.
With $250M in revenues a paltry two years after launching (though in all fairness, technically Rosenblatt’s crew has bought many businesses that pre-existed Demand Media’s incorporation), then the company’s path seems to be an IPO, though those are as rare as companies with revenues these days (oh, wait, see a connection)? In fact, while Rosenblatt has long been a proponent of social networking, he’s attacked the market in a very smart, methodical and wise way.
In other words: sure, social networking tools and applications are powerful, but devoid of any high quality, premium content, packaged and editorialized in a way that consumers and advertisers can digest, social networking can kill a brand and property, too.
It does go to show, however, that it takes money to make money: Demand Media has raised a dizzying $355M… and while that seems like a breakneck amount, Rosenblatt is on pace to create enough value, fast enough, to make the numbers add up. After all, few companies will be able to step up to the plate and pay $1B - let alone $3B - for the company. So for investors to get back their money, then an IPO seems like the likely route.
But enough from me, here’s an interview Kara Swisher did with Richard:
YHOO blew the deal, sure, and you have to wonder what that says for its bankers?
Allen & Co. is trying to raise money for Linkedin at a whopping $1B valuation. It’s worth noting that Allen & Co. is encroaching more and more on West Coast startups, it raised $50M for Ning and Slide at monster $500M valuations.
Interestingly, Allen & Co. was not involved in the YHOO/MSFT debacle… which begs the question: what impact, if any, will advisors of that deal have?
Microsoft was represented by Morgan Stanley and Blackstone, while Lehman Bros. and Goldman represented Yahoo! Goldman can do no wrong in proprietary trading, but what about its M&A advisory unit. Say what you want about the gold standard in investment banking, but on YHOO’s representation, you can’t help but think that Goldman takes a hit, as does Lehman Bros. Maybe they could not manage YHOO nor Yang, but as someone who has closed a few deals as an advisor or executive on a management team, I can tell you that managing personalities is a major variable.
MSFT was repped by Morgan Stanley, what I find odd, so odd, is that Yahoo! Chairman Roy Bostock sits on the board of Morgan Stanley, too. I am not suggesting any impropriety but that seems too close for comfort.
Again, why on Allen & Co.? They have become the leading investment bank in media, yet no one called on their service.
You will have to pardon Allen, they were busy cashing the checks off the Slide, Ning and soon LinkedIn deals.
Now that being said, let me check my bank account before Goldman and Lehman pull some strings and cut off the water. I’m kidding, I think.
Despite the tough financial climate, the week ushered a sizable investment in content producer Next New Networks (N3).
Blue-chip investor Goldman Sachs and media-oriented Velocity Interactive Group (VIG) led a $15M Series B investment round in N3. VIG is the fund that was created by way of a merger between ComVentures and Jon Miller and Ross Levinsohn’s new endeavor. Miller was actually a member of N3’s board.
After the investment, Goldman and VIG join Spark Capital, Saban Media Group and Bob Pittman (formerly of AOL and MTV) as investors. That’s as blue chip of an investment group as you can get for any media company. Spark Capital is a champion of media and content investment, something that is hitherto very rare amongst VCs, who prefer technology opportunities.
N3 - which CEO Herb Scannell described to me as Weblogs Inc. in video format (I asked him once if that would be a fair description, I am not sure if he introduces it as such) - has a range of properties which, when combined, have generated over 100M streams throughout 2007.
While the naysayers are quick to point out that this is a small number relative to TV reach, as a video producer ourselves at WatchMojo.com with a sizable library, I can attest to the fact that this is a very impressive number of streams over a yearly period. In the spirit of giving credit where it’s due, it should be noted, that Revision 3 has also crossed that threshold, too. So hats off to both companies. Broadly speaking, WatchMojo.com is similar to those companies insofar that we all create original content but we’re all very different. Ultimately, we all line up on the same side of the line of scrimmage in the sense that we all strive to convince marketers that online video is more than UGC or pirated content alone.
N3 has a fantastic pedigree of founders, executives and their investment DNA just got bolstered considerably.
Goldman Sachs, for example, invested $130M in Limelight… sheltered them for some time against the Akamai litigation. While the company’s post IPO life has indeed been challenging, it was a successful case study in how quickly Goldman could take a company to the public capital markets. This is no small consideration in light of the fact that the same markets are currently embroiled in the sub-prime mess. Of course, to paraphrase Mr. Miller, very few companies are actual IPO candidates… and it could be argued that N3 (or Revision 3) are no-brainer acquisition opportunities.
In fact, Revision3, too, has an all-star lineup of founders, execs and investors (it is founded by Digg’s Kevin Rose and Jay Adelson). They have raised $9M since launch, notably from Greylock.
Admittedly, my jaw drops a bit when I compare how much money I’ve invested in WatchMojo.com to build the library and get the traction we have… but I won’t lie: if you can raise that much money, hey, more power to you.
Many were waiting for the N3 funding news to materialize, in fact. I presume the tough climate added to the cycle time. But to raise $15M is impressive regardless of how long it takes.
Incidentally, last week I noted that Velocity Interactive Group was building a new media focused, online video-centric fund, and judging by their investment, their next investment would likely be in content.
It will be interesting to see what some of their next moves will be. If you take a step back and envision the “keiretsu” that they are building, I can imagine a few missing elements that they will be looking at filling - or reinforcing - in order to add velocity and momentum in the months to come
As a content producer ourselves, I did not specify that content would be the next piece, but knowing that Jon Miller was on their board, it was easy to see the pieces fall in place with content and Next New Networks being the “void” they were looking to fill.
Heavy Hitters
The $15M Series B pushes up NNN’s total funding to $23M, just over what Mania TV has raised ($22.7M), but still a bit less than what Heavy.com ($25M) and Ripe TV ($32M) have raised in the video content space.
Mania TV just raised an additional sum last week. This is a trend that will continue. While some, like Paid Content’s Rafat Ali, question the model altogether, and others, including Mr. Scannell or Blip’s co-founder and CEO Mike Hudack remain unsure of the model that will prevail, it is a given that online advertising will continue to grow, and that professional content will draw the bulk of video advertising.
Any way you dice it: to quote CBS Interactive CMO Patrick Keane: online video is where search was in 2002, and considering that in December 2007, there were more video streams than search queries, the best is yet to come, and investors are just starting to place bets.
In fact, while the numbers seem large, this is still far less than what the platform and aggregators have raised (see a list of funding by video company breakdown here), and it does reinforce what we outlined last year: VCs will focus more and more on content investments as advertisers reject UGC and demand premium content.
Technically, Wallstrip founder (whom CBS bought, incidentally) and TubeMogul investor Howard Lindzon was right in arguing that I was wrong on that point last year, but I think I was wrong in the timing. That did not happen in 2007… but 2008 seems to suggest that it is happening as we speak.
Believe it or not, there are more and more digital media funds being set up every day.
That this is happening against the backdrop of a financial meltdown is even more impressive.
Here’s the rundown of funding in the video space
You have to wonder: is Jerry Yang a hero or a goat?
Forget what you think of Jerry Yang as one-half of Yahoo!’s founding team, forget what you think of Yang as the Chief Yahoo! who saw Yahoo!’s meteoric rise and devastating fall from grace.
Forget even Yang in the over-hyped first 100 days since former Chairman and CEO Terry Semel left the company in 2007 after Eric Jackson’s crusade.
Ask yourself, however: what about Yang in the past 20 or so days since MSFT launched its unsolicited $44.6B deal.
What do the stakeholders think of Yang?
- Employees
- Users
- Clients (advertisers)
- Partners (that include hundreds of newspapers, AT&T, etc.)
- Shareholders
- MSFT (inevitably the company’s parent)
are just some of the stakeholders who will be impacted in the future. Many have been impacted already.
There have been a handful of shareholder lawsuits already. We’ve also seen an exodus of staff; the same people who MSFT Chairman Bill Gates supposedly covets.
I think that Yang has - until the MSFT bid - done an admirable job; the way he’s acted since, however, has been disgraceful. While I do respect a captain wanting to be the last to get off a boat, I don’t care much for people who sabotage a boat, either.
What Yahoo! seems to be doing is bite its nose to spite its face: the recent $1-3B severance package he so generously and recklessly doled out was the last straw for me, it was also borderline criminal, akin to someone raiding the corporate coffers knowing full well the impact of the deed.
Yang owns less than 10% of the company and unlike his peers over at Google, he does not actually own any special voting class shares. He is also not the Chairman of the Board. At what point is it really Yang’s decision when his actions adversely impact millions of others?
The last executives and founders who treated a publicly traded company like their own piggy banks ended up doing time, so as a friendly warning, someone in Yang’s camp of groupies should give him some good advice.
The problem is very few people in the Valley or in the mainstream media elsewhere dare to say any of this vocally. Everyone writes gloriously about Yang 1994-2007 but they seem to forget that Yang 2008 has been a disaster. I lost any and all confidence during the Q4 2007 earnings call on January 29th where I signed off: lawyers are drafting papers for a takeover bid; I wasn’t exactly wrong.
Silicon Valley might be an echo chamber, but it does not operate in a vacuum, the lawsuits you have seen thus far are nothing compared to what will hit Yahoo! and Yang if Yang continues this charade.
The struggling Internet firm has reportedly explored alliances with Google, Time Warner-owned America On Line, and social networking website MySpace owned by News Corp.; each potential deal stranger than the other with the resulting outcome murkier for shareholders.
What I’d like to do as a Yahoo! shareholder and user is see Yang come to the realization that the company he founded has run out of options the day MSFT checkmated it with a $31/share offer; he can take some time to come to that realization, but sooner or later, the energy he is spending on dead ends and potentially litigious pursuits he should be devoting on how to maximize the final sales price MSFT is willing to pay, how best to mitigate any risks and integrate the companies.
At this rate, however, it won’t be too late before Yang is pulled from the mound to make room for someone who understands the stakes in the game.
After a few - well, shall we say it - boring years, Yahoo! is turning into a soap opera. The lawsuits have started:
The Wayne County Employees’ Retirement System of Michigan, owner of about 13,600 Yahoo shares, sued Yahoo in Delaware’s Court of Chancery
And a major investor, Mutual fund house T.Rowe Price, which owns 18 million Yahoo shares, is prompting CEO Jerry Yang to cash in his chips at MSFT’s next offer (NY Post via Valleywag).
I see this settling sooner than later. Yes, there are a lot of egos involved, but while MSFT and YHOO are lobbying investors publicly, privately I presume the bankers and lawyers are brokering a cease-fire in the $50B market cap (or $35/share). I can see why the most senior leadership on both sides want to be seen as looking out for shareholders.
The major power broker will very well be Capital Research and Management who owns 6% of one and 11% of the other. Here’s why I think they all want a happy merger sooner than later: to remove the uncertainty and to make way for the creation of a $400B market cap behemoth.
MSFT + YHOO would command much better growth prospects. In fact, by adding YHOO’s $7B revenue streams onto MSFT’s $51B 2007 revenue base, combined with YHOO’s higher P/S multiples pushing MSFT’s P/S and P/E up… MSFT being a $400B company is not out of the realm of possibility.
MSFT’s P/S is 4.52, YHOO’s is 5.81. Combined, the new company would have something near 5.25. Google’s is 9.50.
MSFT’s revenue grew from $44B in 2006 to $51B in 2007.
For 2008:
- without YHOO, just last week Microsoft raised its full-year forecasts for fiscal 2008. Revenue is now projected to be $59.9 billion to $60.5 billion, up from the Oct. 25 forecast of $58.8 billion to $59.7 billion, an increase of 1.3 percent on the high end. The average of $59.9 billion to $60.5 billion is $60.2B.
- Yahoo! alone will do $7.2B to $8B, according to their recent earnings call.
Combined this means a revenue range of $67.1B to $68.5B, or an average of $67.8B.
Using a 5.25 P/S multiple, this projects MSFT’s value to be $355.5B.
That’s just using the P/S and revenues. There’s a lot of cost savings (MSFT pegs this at $1B) and the P/E projection - while less obvious - is more interesting. MSFT netted $14B in 2007. Yahoo! only $600M. Combined you are looking at a company that nets $15B in profits. Google generated $17B in revenues!
More importantly, MSFT would be able to invest all more into IT to make Yahoo! competitive. MSFT’s current P/E is 16 (but this after the week-long slide after the YHOO deal was announced), YHOO’s is 60. YHOO’s is indeed distorted due to its holdings in Alibaba and Yahoo! Japan, but there is no way that investors won’t give a combined entity firing off all cylinders in software, entertainment and online advertising anything less than 30. Google’s P/E as a pure play online advertising/search play is 38 P/E.
MSFT/YHOO profits of $15B x a P/E of 30 is $450B.
Even if the P/E is a more sedate 25, then at $15B profits, you are looking at a company worth $375B.
At half of Google’s P/E, you get a multiple of 18, that yields $270B. But, that is way too low cause MSFT is right now at 16 and was above this before the YHOO was announced.
For this reason, a post-merger YHOO/MSFT would be worth near $400B (average of P/E and P/S basis) and more than offset any decline MSFT has faced this week.
Read more in the original post here.
Note: Long YHOO
PLAY
