This Raises A Big Question On Yahoo Deal
Yahoo! Inc (NASDAQ:YHOO) stock continues to be in limelight due to the constant flow of news on its data breach that affected 500 million e-mail accounts.
Verizon Communications Inc (NYSE:VZ) had not made clear its views on the matter until recently, when it made a statement that could hurt YHOO stock. The company stated on Thursday that it had a “reasonable basis” to believe that Yahoo! Inc’s massive data breach represents a material impact that could allow Verizon to withdraw from its $4.83 billion deal to buy Yahoo. Verizon’s general counsel Craig Silliman told reporters that the data breach could trigger a clause in the deal that would allow Verizon to not complete it. (Source: “Verizon says Yahoo hack ‘material’, could affect deal,” Reuters, October 13, 2016.)
This is the first direct signal that Verizon has sent that the company would be renegotiating the terms of its deal with Yahoo. With its statement, the company has put the onus on Yahoo to prove how the data leak was not a material adverse change. This is likely to weigh on YHOO stock in the coming days.
There have been numerous media reports speculating whether Verizon would demand a hefty discount after the news of the Yahoo hack became public. It was reported that AOL, Inc. (NYSE:AOL) CEO Tim Armstrong was not happy about this lack of disclosure. The e-mail accounts were hacked in 2014, but it was only revealed after Yahoo’s deal with Verizon was signed in July this year. Yahoo notified Verizon about the data theft in September.
Earlier this week, Verizon CEO Lowell McAdam had clarified that there were no plans to walk away from the acquisition deal, but he didn’t rule out the possibility of renegotiating the terms. He also said that he considered Yahoo as “a real value asset”. (Source: “Verizon Puts Yahoo on Notice After Data Breach,” The Wall Street Journal, October 13, 2016.)
The Bottom Line on YHOO Stock
Investors will be looking forward to next week, as Yahoo announces its results and more clarity emerges from the ongoing negotiations between the two companies.
Yahoo stock has been inching up gradually since the Verizon deal. The stock was not affected much even after the company had disclosed the theft of data related to 500 million accounts. However, the likelihood of Verizon paying less to acquire Yahoo may push YHOO stock down.