With the stock being at less than $19 come Thursday close time, the stock zoomed up $9 at the open Friday morning… I believe over 440M shares exchanged hands on Friday. Bear in mind YHOO’s average shares traded in a day was about 40M. Today, in one day, over 90M have already exchanged hands.  That brings the 2-day total to 530M.

Yes, with the tender offer being at $31/share, there is plenty of room for merger arbitrage traders to make plenty of money… but could it be that MSFT is already using its $20B cash hoard to be buying up shares in preparation for a proxy showdown?

$20B in cash would get you (even at $29/share) about 689M shares.

I doubt this is the case, but if MSFT has been aggressively buying up shares from anyone that has sold (and fearing something like an anti-trust ruling, a competing PE bid etc.) it is possible that many shareholders took advantage of the short-term relief the stock got to cash out.

Yahoo! has approximately 1.25B shares outstanding. Assuming (big if) MSFT has bought up all of those shares, that would already give MSFT 55% of the shares.  Yes, Yahoo! has a poison pill provision… and this aggressive share buying would make that moot.

Remember one thing: MSFT could have easily bought the shares via third-parties in order from avoiding having to disclose any of this.  This is how Jana Partners build up a sizable chunk of CNET stock.  If this is the case, then imagine if MSFT has been building up a position in Yahoo! all throughout 2008 and this is, in fact, what they only bid $31/share.

I could be wrong and probably am, but for a moribund stock with a passive management strategy, Yahoo! sure is providing us with a great storyline these days.