Yahoo Wants to Buy Myspace for 25% of Itself?
There is a rumor flying around that News Corp. is exploring the sale of Myspace to Yahoo — for 25% of Yahoo. Yahoo’s market cap is at $37.57 billion, putting the proposed sale at around $10 billion. Seeing as News Corp. bought Myspace for $560 million only a few years ago, this would be the most visible and largest return on investment of this era.
This is an awesome deal for News Corp — remember the saying: buy low, sell high. Myspace is #1 in social networking with no immediate signs of losing its crown, but this is the best time to sell. If Myspace begins to slip, its price will fall dramatically. Nobody can really expect more than $10 billion for a website in the short or mid term future — this is about as sweet as it gets.
Even if they did buy Myspace, the purchase only makes sense if it continues to grow. Even if Yahoo could kill that deal between News Corp. and Google, it wouldn’t do much to pay back the purchase price. Not to mention that Google deal is inked for another 2 years.
Yahoo is struggling. But they are still the single most visited site on the web. They might be sucking in search, but they have diversified their business across multiple fronts. If they sold a part of themselves, they’d be trading that enormous diversification of business units and web properties for one giant gamble.
For $10 billion, I’d like to think Yahoo would rather invest in one giant search gamble rather than on hype. For $10 billion, Yahoo could buy 500 startups for $20 million each and probably fair better in the long run. Let’s say Myspace grows another 20% over the next two years — that equates to Yahoo growing 5% because of this purchase over two years. 2.5% a year growth for 20% of your company sounds pretty stupid to me seeing as 20% sounds pretty ambitious from my point of view.
This is why this sale will never happen. But it’s an interesting rumor, nonetheless.
