MSFT/YHOO – How much is in it for me?

There are rumors that Microsoft will increase the bid for Yahoo! from $31 to $34. Which prompted me to calculate how much money I could make from this transaction based on the stock options that I own. Let’s assume for the sake of this example that the transaction closes by end of October 2008. There are 2 different scenarios:

  • No accelerated vesting of options
    All vested options are under water at $31 and $34. So no difference.
  • Accelerated vesting of options (100% when the deal closes)
    Some unvested options are actually in the money. The potential gain is almost 50% higher at $34 than at $31 and makes it into the low 5 figures.

The second scenario is dependent on the double trigger outlined in the change in control severance plan. It’s formulated loosely enough that I’m not holding my breath.

Note: ESPP, stock and RSU have been excluded from this calculation.