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Yahoo stock moves closer to Microsoft bid level

The potential of a Microsoft takeover bid for Yahoo, let alone an improved offer has propelled the value of Yahoo's stock to almost match the $31 a share value of the initial bid proposal.

The Microsoft takeover bid for Yahoo has entered a new and slightly confusing phase, with the market now looking firmly at Microsoft to raise its indicated bid to match the rapidly improving share price of the web giant.

The value of Yahoo stock has risen considerably in the last week, jumping from $19.13 (9.56) per share on 31 January to a high of $29.50 on Tuesday. At the time of writing the share price sat at $29.04 (14.52).

Microsoft offered to buy Yahoo shares last week at a 60 per cent premium on the 31 January closing price, but news of a possible takeover has caused the stock to rise, clouding the value of the deal.

The company offered over $44 billion for Yahoo, to be paid in a combination of cash and Microsoft stock.

However, news of the attempted takeover has affected the market price of both companies. Microsoft stock has fallen as Yahoo's has risen.

This means that owners of Yahoo stock would now theoretically be better off selling their shares to other investors than taking Microsoft's offer.

The deal is further worsened as the non-cash portion of Microsoft's offer was fixed at the price of its stock on the day of the announcement, prior to its fall.

However, if the deal falls through it is likely that the value of both companies will level out to previous levels, and Yahoo investors will lose their recent gains.

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