If Reuters has this right, this sounds like a troubling conflict of interest:
Most of Yahoo Inc’s (YHOO.O) top institutional shareholders may be more interested in making sure Microsoft Corp (MSFT.O) does not overpay for the Web pioneer, because they have more money invested in the bigger software maker, a research report said on Friday … A shareholder that owns both the target and an acquirer will be more interested in the net benefit of a deal, RiskMetrics said. Shareholders with more money invested in Microsoft than Yahoo will most likely urge Yahoo not to push its case too hard. “They may be more concerned with whether Microsoft will get caught up in a ‘deal frenzy’ and suffer the ‘winner’s curse’ by overpaying for Yahoo,” RiskMetrics analysts wrote in an M&A Edge Note. “We can expect shareholders who own both companies to pressure Yahoo directors to extract a material sweetener from Microsoft (which will help Yahoo directors save face) that isn’t seen to destroy the perceived benefits of the merger, prior to … ultimately succumbing.”
Many Yahoo shareholders would love it if Microsoft got caught in a deal frenzy, but as I have noted earlier, Microsoft may not have to raise its bid of $31/share.