You see, as two extremely widely held securities, the tug-of-war for Yahoo! - the world wide web’s most distressed crown jewel - will ultimately be determined not by the CEOs or CFOs of either company, but rather, by a bunch of money managers who run the country’s institutional investors, which include mutual and hedge funds.

Looking at publicly-available data as of September 30th, 2007, I am listing the major mutual fund and hedge funds who own shares in both MSFT and YHOO.

Institutional investors, including hedge funds, holding both MSFT and YHOO - color coordinated to boot!

Assuming we don’t care about whether they are hedge funds or mutual funds, then you see a lot of crossover:

Of course, it does matter whether it’s a hedge fund or a mutual fund, as hedge funds are unregulated and share the investment profile and horizon of a mercenary. To them, a quick payoff is paramount, whether to a mutual fund, they might have a long-term profile relative to hedge funds, but beating the market is of main concern.

To summarize, the common denominators own 18% of MSFT and almost 30% of YHOO.

Interestingly, my argument is that the real question is who also owns Google, for a combined MSFT/YHOO will put a dent in Google’s business one way or another (if for no other reason that it has more firepower and can inflict carnage in any blow-for-blow fight, be it for a startup, market, talent etc.).