Buried in the risk factors of the Yahoo! Inc. (NASDAQ: YHOO) third-quarter 10Q is an admission that the Verizon Communications Inc. (NYSE: VZ) buyout is at risk. Risk factors are often overstated because the SEC requires maximum caution in disclosures, but the statement should unnerve investors.
The clause comments about:
… risks that Verizon may assert, or threaten to assert, rights or claims with respect to the Stock Purchase Agreement as a result of facts relating to the Security Incident and may seek to terminate the Stock Purchase Agreement or renegotiate the terms of the Sale transaction on that basis
The “Security Incident”:
On September 22, 2016, the Company disclosed that, based on an ongoing investigation, a copy of certain user account information for at least 500 million user accounts was stolen from Yahoo’s network in late 2014
Most experts believe that the Verizon strategy of adding large web properties to its business will not go away. Yahoo, the telecom management argues, is a perfect stablemate for AOL. Together, they assert, Verizon has a chance to compete for online ad dollars with behemoths Facebook and Google, which control the lion’s share of the market.
A renegotiation of the terms of the Yahoo sale due to the breach? Almost certainly. A termination? It’s possible.