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Pegging Yahoo!’s (NASDAQ: YHOO) potential financial exposure from shareholder lawsuits after it turned down an offer of about $33 from Microsoft (NASDAQ: MSFT) is hard. It starts with the difference between the offer and where the stock falls after the rejection. That price could be $22 or lower. Investors would have lost $12 billion, and perhaps more.

Yahoo! is lucky, if one can call it that. Proving damages beyond the actual financial set-back to shareholders will be hard. Investors were not "damaged" as much as they simply lost money.

The other factor to Yahoo!’s advantage is that some groups of stockholders may not sue it at all. That would include the company’s founders. Along with some large shareholder who supported the company walking away, probably 20% of the stock is in hands of people who would take no action. But, large class actions suits, especially if they are making progress, could be joined by that majority of the stockholder base who held shares three months ago as well as when the offer was rejected.

The issue of who held shares and when is critical to the math. Many owners sold their shares the day the offer was public. Shareholders who were in at $19, where the stock traded before the offer, can’t get the full difference between that and $33, if Yahoo!’s share price moves up again. And, it could, if the company cuts a deal with Google (NASDAQ: GOOG) to sell its search advertising.

Suffice it to say, Yahoo!’s board took a very long bet, especially when it comes to shareholder liability, when it turned the offer down. Depending on how many shareholders actually saw $14 in profit go down the drain, a lawsuit lost by the company could cost a fortune.

That does not include the tremendous burden on management to defend any suits or the tens of millions of dollars in legal costs. Otherwise, rejected the offer was just a fine idea.

Douglas A. McIntyre