If you have the time to rifle through a 64-page document, you'll find some juicy reading in the shareholder lawsuit against Yahoo! (NASDAQ:YHOO), which was unsealed yesterday.

Did you know that Microsoft (NASDAQ:MSFT) wanted a friendly takeover so badly that it was committing an additional $1.5 billion for Yahoo! employee retention? Have you ever wanted to see executives botch the dictionary's rules in exhibits of internal documents that show February's poison-pill response taking shape? Are you curious about how much board members have been making, and the connections between Yahoo! and many of the board members' other businesses and family members?

The nugget that seems to be grabbing everyone's attention is one of the oldest documented in the now-unsealed document. Did you know that Microsoft offered to buy Yahoo! in January 2007 for $40 per share?

That's what the plaintiffs are asserting. If accurate, it would rub even more salt in the wounds of shareholders still smarting over Microsoft's decision to walk out on Yahoo! (for now).

But before investors begin raising those pitchforks, it's important to put January 2007 into its proper perspective.

  • Yahoo!'s shares were trading higher than they were a year later, when Microsoft stepped up with a $31 offer. When Mr. Softy approached Yahoo! earlier this year, the latter's stock was still in the teens. But in January 2007, Yahoo!'s stock traded between $25.26 and $29.88.
  • Yahoo! was still taking the wraps off of Panama, the paid-search platform upgrade that was supposed to move Yahoo! closer to Google (NASDAQ:GOOG) in terms of monetization performance.
  • A massive reorganization took place just weeks before the alleged $40 offer, restructuring the company into three different areas and giving investors hope that it was ready to shake the stagnancy.

Yahoo! is a shell of that company today. Uninspiring earnings have taken the shine off of Panama. The company has relinquished even more market share to Google, and its reorganization has clearly not panned out.

This doesn't make Yahoo! any less culpable in blowing the reported $40 offer. If anything, it should make investors think twice before buying Yahoo!'s claim that it can dig itself out of this mess on its own. Its vision has been flawed and overly ambitious in the past.

Microsoft knows this. As badly as it may want Yahoo! today, it knows that waiting is in its best interest. If it offered $40 last January and came back with $31 this January, what's the over-under for Microsoft coming in at $23 next January?

The unsealed complaint, all 64 pages of it, chronicles the erosion of Yahoo!. And while Yahoo! deserves the right to defend itself against those claims, shareholders equally deserve the right to be skeptical.  

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