Big Stock Buyback Trumps Convertible Debt Offering by Yahoo!

Yahoo! Inc. (YHOO) has made two announcements hidden in one announcement after the close on Tuesday. The first announcement is a $1.0 billion convertible senior notes offering which will mature in 2018. The more important announcement is that Yahoo! has increased its common share buyback authorization by $5.0 billion.

Today's note offering is a private placement as a Rule 144A under the Securities Act of 1933, meaning that they will not be registered securities and will never see the light of day for retail investors. The notes will be convertible into cash, shares of Yahoo’s common stock or a combination of cash and shares of common stock, at Yahoo’s election. Yahoo! said that it may use up to $200 million of the net proceeds to repurchase shares of its common stock from purchasers of notes in the offering in privately negotiated transactions.

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Back on July 22, Yahoo! announced that it had entered into an agreement to repurchase 40 million shares of its common stock owned by Third Point LLC at a purchase price of $29.11 per share. Shares closed down almost 1% at $34.63 on Tuesday, but the shares are back up almost 2% more at $35.40 in the after-hours after this report. Yahoo!'s stock has traded in a 52-week range of $18.19 to $36.19.

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As far as what another $5 billion translates to in real world terms, the stock's market cap according to Yahoo! Finance is just over $36 billion.

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