Talk about a nerve-wracking couple of days for Yahoo investors, especially the ones who flooded into the issue on Friday on word that Microsoft was increasing its offer to $33 a share.

Yahoo

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[MSFT  Loading...      (%)   ] shares jumped 10 percent on that news, even though over and over again, we mentioned on the air as this news was breaking that despite an offer increase, there was still a chasm between Microsoft's bid and Yahoo's ask of $37.

Of course, now we know that Microsoft

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[YHOO  Loading...      (%)   ] is abandoning its bid, and the speculation is all over the Street as to just how low Yahoo shares will plunge on the news.

I spoke to a source very close to the highest echelons of Yahoo's executive team who worried these shares could touch $15 or $17 this morning.  Citigroup's Mark Mahaney is out with a note today suggesting they'll close the day down to only $26. Other sources say look for a steep decline to $20 or so before a late day recovery.

Across the pond in Frankfurt, the stock fell 20 percent to 14.55 euros ($22.50) in midday trading.

Either way, no matter where they go, they won't touch $33, and they certainly won't go anywhere near Yahoo's own self-valuation of $37, and that's really all that matters.  Microsoft upped the ante to a 70 percent premium and Yahoo sources told me Sunday, in no uncertain terms that the offer was "low ball" and "opportunistic" with Microsoft taking advantage of a steep slide that took place in a very narrow period of time.

I don't buy it.

The steep slide has been going on for the better part of three years. If Microsoft wanted to be truly "opportunistic," the premium it offered would be substantially below 70 percent.  And yet Yahoo's board voted unanimously against such a deal.

I haven't talked to a single Wall Street analyst who covers either company who isn't stunned that this deal fell apart.  And many of you seem to agree: Mary Ellen writes in that "Microsoft and Yahoo both screwed the Yahoo shareholders. Microsoft probably rethought the acquisition after the market indicated a lack of enthusiasm for it ... Anybody who shorted Yahoo is going to make a ton of money.  Those of us who own the stock are going to get creamed."

"Roester" claims "Jim has the best article going today. His two sides of the story are by far the best information presented out on the net right now. It seems like this whole time the story has been about Microsoft. It's time for Yahoo to stand up for themselves and tell its shareholders what really happened. The word on the Internet right now is that Yahoo is going to get hammered on Monday. Perhaps not if the real story is explained."

Thanks for the kind words, Roester!

Also Roester, Jerry Yang has posted his own blog about this (http://ycorpblog.com/2008/05/04/ok-so-now-what/) which I encourage all of you to read. 

His bottom line:  "We've emerged a stronger, more focused company with an even greater sense of purpose. I'm so proud of how this company has come together, put the noise aside, and showed the world that we have the resolve and determination to thrive in challenging times."

More telling to me:  "I'm sure you've all read or watched the news about this. Frankly, there's a lot of nonsense and misinformation in what's being reported.  Just so we are clear, here's what happened. The board takes its mission very seriously. We clearly indicated to Microsoft that we were open to a transaction but only if it were on terms that fully recognized the value of Yahoo and was in the best interests of our stockholders. No one is celebrating about the outcome of these past three months. And no one should..."

Mark Rowell writes that, "I hope the shareholders drag Yang's a*s to court."

S.D. says, "You are spot on. It is strange to see co-founders and board collide like this.  Angrily never intended to accept a bid, and acted rude to Microsoft.  Founders in management is like death when going public.  They never try to enhance shareholder values by selling/spinning off ...The last years have been poor and they are losing this battle. By saying good-bye to Microsoft, YangFil must fight Google alone. Say hello to $20 again."

Just a sample.  I'll be following this through the day.  I'm keen on your thoughts:  Did Yahoo blow it?  Did Microsoft?  I'll print some of your responses.  Should be a roller-coaster day for those of you with positions in each of these companies.

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