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Yahoo shares get a dose of Miracle-Gro

The company's stock has sprung up over the past two weeks, hedge fund managers say, for a pretty down-to-Earth reason.

Yahoo's stock price is beating a little stronger these days. And that rise was not necessarily driven by the full onslaught of the company's big, splashy, three-year financial game plan unveiled two weeks ago, say several hedge fund managers.

Rather, the 12 percent share price increase over the past fortnight may stem from Yahoo's quiet notation in that financial game plan that the company's first-quarter performance is expected to fall in line with Wall Street's current assessment.

"Their stock price has risen, not because of their plan, but because they reaffirmed their first-quarter guidance," said one hedge fund manager. "Investors were scared that if they puked on their first-quarter performance, Microsoft would lower its bid or not bump it up."

Microsoft is still biding its time on a buyout offer for Yahoo initially valued at $31 a share.

Yahoo on Monday closed at $28.93, up 12 percent from its closing price the day before it unveiled its financial plan--and first-quarter guidance reconfirmation--two weeks ago. That's a pretty sizable pop, compared with the Nasdaq, which climbed 4.7 percent during the same period.

Another hedge fund manager said rumors on the Street last week were suggesting Microsoft might offer anywhere from $34 to $36 a share for Yahoo, and there was talk that the Redmond giant would be willing to offer an all-cash buyout of $34 a share.

Meanwhile, investment bankers and proxy solicitors say Yahoo is likely done with its intelligence gathering--er, make that investor road show presentations. They note that companies can usually get a good feel within two weeks which way investor sentiment is leaning, be it a hostile merger proposal, an IPO, etc.

"Some investors will be blunt, some will say let me think about it, and some say nothing," said Bruce Goldfarb, chief executive of proxy solicitation firm Okapi Partners. "A company will collect the information and then think about their next step."

Goldfarb and one investment banker said there's a message coming through loud and clear with Yahoo's rising stock price: Investors "expect more money."