The two major US broadsheets - WSJ and NYT - seem to be the chosen vehicles for all kinds of corporate shenanigans these days.
Late last week we had the NYT-propagated rumour that Microsoft might be thinking of buying Adobe, which led to a spike in Adobe's share price but was soon dismissed by sources of rival WSJ. Yesterday it was the WSJ's turn to chuck one out there; this time concerning the idea of AOL acquiring Yahoo.
While this makes some sense in so much as both companies are primarily online hubs these days, one obvious stumbling-block is that AOL is around a tenth of the size of Yahoo by market cap. This shortfall, suggests the report, would be made up by private equity partners and nice, big pile of debt. Liverpool fans will be more familiar than most of them ever expected to be with this kind of deal.
Right on cue, the NYT poured water on the story, dismissing it as a ‘trial balloon' leaker to the WSJ by some of the bankers contemplating such a move. That theory had already been suggested by TechCrunch which, despite having recently been acquired by AOL, claimed to have no inside knowledge of the matter.
A trial balloon is a way of gauging investor response to an idea by chucking it into the public domain and seeing how the stock behaves, apparently. The WSJ story broke before the start of trading, but Yahoo's shares initially jumped ten percent, before settling down at a four percent increase. AOL's shares were up a couple of percent at time of writing.
In the aftermath Reuters reported that News Corp - the owner of the WSJ - has also been approached by private equity over a similar bid for Yahoo. Meanwhile Bloomberg, which must have been feeling rather left out, reported that Yahoo has been anticipating some kind of approach and has hired Goldman Sachs to advise it on how to deal with it.
What this all amounts to is not much, for now. Yahoo is considered a viable take-over target because it's perceived to be struggling. But as Microsoft found out, the people who run it have a funny way of protecting shareholder value. Microsoft would have paid $33 per share in 2008, even after today's rally Yahoo's shares are worth less than half that.