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Yahoo's 'No', big listing & more...

Feb 11, 2008

  • Asian markets continue to reel in the red, most of them probably playing catch up with other global markets for the long holiday they had last week. Currently, while indices in Hong Kong and China are down almost 2%, the Korean index is trading weak by 3%. Fears of a US economic recession has failed to subside despite the Federal Reserve's action of cutting interest rates and putting more money in the hands of bankers to lend. The pain on the back of subprime losses has been so severe for the big financial institutions in the US that they fear to lend. Further, due to inflation fears emanating from the central bankers around the world (like the UK, Euro and Australia), stockmarkets are not seemingly ready to bite the bait.
  • As far as Indian stock market are concerned, participants are waiting for the big listing of Reliance Power. The company, which recently sold off 228 m shares to retail and institutional bidders, will list its shares on the stockmarkets today. It offered its shares at a price of Rs 450 (Rs 430 for retail investors), and has seen its IPO oversubscribed more than 70 times. Importantly, valuations were not even talked about as investors poured in applications for getting pie of the company, which does not have even a single rupee of business earnings.

    What is more, investment bankers for the issue turned sellers of dreams, prophesising about the listing day gains of this IPO. But subsequently, the global market turmoil, which has impacted Indian stocks as well, has led to the same applicants running helter skelter to issue stop payment requests to their banks for the cheques that were issued for applying to this IPO. Many succeeded and many didn't. Now, there are permutations and combinations made out for the listing price. Some commentators have even gone on to say that the listing price of this issue will determine the course of Indian stock markets!. Now, that is shortsightedness at its best...again!

  • Microsoft's US$ 45 bn bid for the beleaguered Yahoo took an about turn late last week as the latter indicated of its plans of rejecting the bid, citing that it 'massively undervalues' the company. In fact, Yahoo has asked for nothing more than US$ 40 per share, almost 30% higher than Microsoft's original bid of US$ 31 per share. Yahoo's minimum quotation is, in fact, almost 27% higher than the stock's current price and more than double its price when Microsoft had put in its bid of US$ 31 per share.

    Microsoft's aggressive bid indicated the seriousness with which it is pursuing its Internet growth strategy, as the software business growth seems to be tapering off. Interestingly, Yahoo's objection to Microsoft's bid comes after the Internet search giant, Google raised 'competitiveness' issues against the operating system major, terming the software giant as using 'hostile' means to curb competition. As a matter of fact, Google leads the Internet search space by a wide margin, having a share of 62%, compared to a share of 13% of Yahoo and just about 3% of Microsoft. Google has itself been termed as a 'monopolist' when it comes to the Internet business and smaller firms have welcomed Microsoft's proposal for Yahoo as it is seen as a way that will pare the dominance of Google.

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