Shares in Yahoo fell up to 7.5% on Friday, after some investors doubted the financial benefits of a tie-up with search engine giant Google.

Yahoo said the agreement to allow Google ads to appear alongside Yahoo search results could be worth up to $800m (£410m) in additional revenue.

Some analysts suggest a deal with Microsoft may have been better for Yahoo shareholders.

Yahoo shares later recovered to finish broadly flat, while Google shares rose.

This week Yahoo spurned a Microsoft offer for its online search business.

The internet giant said it did not want to sell just that part of the business and had hoped to persuade Microsoft to revive its $47.5bn offer for the whole of the company, that Yahoo had earlier rejected.

Microsoft said in a statement on Thursday that it was no longer interested in buying Yahoo outright.

Instead, according to the Reuters news agency, it offered $1bn in cash to take control of the search business and a further $8bn for a 16% stake in Yahoo.

Citing sources familiar with the deal, Reuters suggested the Microsoft deal would have delivered $1bn in additional revenue for Yahoo every year from improved advertising rates.

Analysts suggest that Yahoo may face further legal action from shareholders unhappy at their handling of the Microsoft negotiations.

“We think at a minimum that the current deal will result in further lawsuits, which Yahoo will ultimately have to settle, further impacting the economics of the deal,” said Jeffrey Lindsay, an analyst at Sanford C Bernstein.

‘Review’

Yahoo’s shares recovered towards the end of trading on Friday to close down five cents at $23.47.

Google shares however rose 3.4% to close at $571.51.

The agreement between Google and Yahoo will see Yahoo use the search engine giant’s advertising technology.

It is expected to further bolster Google’s position as the market leader, but the additional revenue will also be important for Yahoo.

“Microsoft walking from Yahoo should allow Google to continue to extend its lead in online advertising in the near-term,” said RBS Capital Markets’ analyst Ross Sandler.

“[And] at the same time, fortify Yahoo’s position as the clear number two player,” he said.

Google said it believes that the deal does not need regulatory approval, but that it would delay its start by up to three and a half months to give the US Department of Justice a chance to review it.

The Chairman of the Senate subcommittee on anti-trust, competition policy and consumer rights said it would be looking at the agreement.

“The consequences for advertisers and consumers could be far-reaching and warrant careful review, and we plan to investigate the competitive and privacy implications of this deal further,” said Senator Herb Kohl.

News reported by BBC

Royal Bank of Scotland shareholders have agreed to buy more than 95% of the shares offered in a £12bn rights issue.

The rights issue is the biggest in UK corporate history, and the firm said investors would take up 5.8bn new shares at a value of 200 pence each.

But shares in RBS ended 5% lower in London at 234 pence.

The bank is not alone in having to ask investors for extra cash after problems in the world credit and US housing markets cut the value of its assets.

Banking sector blues

HBOS and Bradford & Bingley have also asked their investors for extra cash.

Analysts are particularly concerned that HBOS, which was formed by the merger of Bank of Scotland and Halifax, will struggle to raise the £4bn it requires to help restore the bank’s finances.

This is because private investors, rather than institutional investors, dominate its share base and are generally less supportive of rights issues.

HBOS’s shares ended 7.2% lower, while Barclays shares fell almost 6% on speculation that it would be the next bank to try and sell new shares.

“It’s a good level of takeup for one of the biggest ever rights issues, done in not easy circumstances” Alan Beaney, Principal Investment Management

Check RBS’s share price

Royal Bank of Scotland (RBS) shares have more than halved in value over the past year – including a 25% slump since the rights issue was announced in April.

Despite a brief rally last week, analysts warned that the bank and its shares may remain under pressure in the coming weeks.

Fundraising

RBS and other banks have suffered from a drop in the value of risky assets, particularly those focused on US sub-prime mortgages.

Sub-prime borrowers are those with poor or non-existent credit histories, and in recent months the number of defaults has jumped.

As a result, many lenders have had to find ways of boosting their cash reserves.

RBS’s circumstances have been exacerbated after it headed a group that bought Dutch lender ABN Amro for 71bn euros last year.

There are about 200,000 RBS shareholders; 93% of the shares are held by major investors, such as pension funds, with the other 7% owned by private individuals.

Shareholders are generally not keen on new share issues because it means that their investments are diluted, the firms’ earnings are spread more thinly and each share takes a smaller slice of the company’s earnings.

To compensate for these downsides, they are offered the shares at a discount to the market price so they could sell for a quick profit.

“It’s a good level of takeup for one of the biggest ever rights issues, done in not easy circumstances,” said Alan Beaney, head of investment at Principal Investment Management.

“The company (RBS) is still trading reasonably well and now doesn’t have that capital worry so maybe it can be knocked forward now.”

News reported by BBC