Yahoo is on the verge of purchasing Tumblr, a social media giant. However, the price offered at $1.1 billion comes as much of a surprise. This signals an expansion of Yahoo into other Internet fields, but bring with it many risks too. This has led to many investors to the conclusion that Yahoo is making a big mistake. In other words, shareholders do not see a nice return once this purchase takes effect.
Yahoo is worth about $28 billion at the moment. It is true that Tumblr may help Yahoo in terms of mass advertising. It may in some ways benefit Yahoo in buying Tumblr, but not at the price stated above. There are many risks with such an acquisition, and Yahoo really needs to adjust itself to such a move.
Many traders prefer Tumblr to be independent, as they feel that it will be able to continue its dynamic agenda. Tumblr is more of a blogging platform, and its independence from Yahoo is seen as more favorable. This is even though there are advantages of the 2 companies merging.
It is important to note that the deal is likely go through, but it will be risky. Only the future will tell if Tumble is worth the price and if Yahoo will be able to integrate easily with Tumblr. All in all, the long term effect may be Yahoo to boost itself for the next decade. Therefore, going long on Yahoo Stock now could actually bring high returns in the next 6 months.