Yahoo! Stock: Will Verizon Cancel Yahoo! Inc. Deal?

Yahoo StockHas Yahoo Stock Suffered from the Massive Data Breach?

The huge data breach at Yahoo! Inc. (NASDAQ:YHOO) by unknown hackers has raised many questions. Apart from the questions of whom was responsible and just how much CEO Marissa Meyer actually knew about it, this is the main issue affecting Yahoo! stock: will the data breach of 500 million user accounts terminate Verizon Communications Inc.’s (NYSE:VZ) acquisition of Yahoo’s core assets?

Ultimately, the Yahoo-Verizon deal will go through. But the price of the transaction will be lower. Verizon simply wants—or  better, needs—Yahoo’s assets. What may happen is that Yahoo! stock will be marginally affected, as Verizon will likely demand a discount. (Source: “Verizon Remains Mum On Yahoo Acquisition Status In Aftermath Of Hack,” CRN, September 28, 2016.)

Certainly, Verizon’s silence on the matter has not helped. This has added further doubt about whether Verizon will go through with the purchase of Yahoo!. The Financial Times has contributed to the air of uncertainty, accusing Meyer of knowing about the data breach in July, at the time that Verizon made its formal offer for Yahoo stock. (Source: “Marissa Mayer knew of Yahoo breach probe in July,” Financial Times, September 23, 2016.)

Yahoo! Has Reason to Worry

To describe the cyber-attack as an embarrassment for Yahoo—and Verizon—is an understatement. This is considered the greatest act of computer hacking in history. If Yahoo! were not in the process of a major asset takeover, YHOO stock would have crashed. Instead, it seems that investors have remained optimistic, media pessimism notwithstanding.

Verizon agreed to buy Yahoo’s assets last July, of which the e-mail service represents one of the core activities. The stakes are huge. With the acquisition of Yahoo’s Web activities, Verizon plans to transform itself into a digital media giant. For now, Verizon remains silent about its intentions. It has given no indication of the impact that cybertheft can have on the planned deal, saying only that “it is evaluating the situation.”

One of the biggest problems is that the agreement for the acquisition of Yahoo! is at an early stage. The Yahoo-Verizon integration has moved at a rapid pace, even if Verizon, which is not yet Yahoo’s legal owner, lacks access to the company’s server. So Verizon has no clear idea of ​​what happened and its consequences.

If Russia’s Involved, Is it Better or Worse for YHOO Stock?

There has been much speculation, unconfirmed, that a foreign state, specifically Russia, may have played a major role in the Yahoo! hack. The usual dynamics of cyberwars involve a handful of hackers. The United States has used cyberhacking against hostile foreign entities. China, of course, has been accused of hacking and spying, as has North Korea. But no country has cultivated a reputation for hacking as keenly as Russia, in search of system vulnerabilities. To date, however, it is hard to decipher the reasons for the attack. Why Yahoo in particular? The reasons for Russia to breach Yahoo! accounts are unclear.

The Russia hacking possibility has sent shock waves throughout Washington. Six U.S. senators have written to Yahoo! CEO Mayer, demanding that she explain the delays in revealing the data breaches and how nobody managed to catch them after such a long period; they happened in 2014. The senators, including Elizabeth Warren and Patrick Leahy, said they were “shocked” by the delays, which they considered “unacceptable.”

The senators have added a dimension of political risk against Yahoo!, specifically targeting Mayer. Yahoo!, under her management, was spending more resources on technology to reach or beat the likes of Google (Alphabet Inc (NASDAQ:GOOG)), rather than on security. The senators say that the breach represents a violation of the privacy of millions of American consumers with their data.

The U.S. Senate might be mad, but whether Verizon will walk away from Yahoo! is another matter. The strategy has been to shift blame more onto CEO Marissa Mayer than onto Yahoo! itself. After all, Mayer will walk away with a nice financial package, no longer having anything to do with Yahoo! Inc.