Verizon Communications is said to be interested in bidding for Yahoo's web business.
The share price of Yahoo initially shot up when news of the potential bid emerged, before closing down 1.3 per cent at $36.17. Verizon's shares closed down nearly 2.8 per cent at $51.99.
Verizon, Google and Yahoo have declined to comment. Bain, TPG and Time Inc have been asked for comment.
Meanwhile, AT&T, Comcast and Microsoft are not expected to launch bids.
Read more: Hedge fund wants to overhaul Yahoo's board
Bloomberg reports that Verizon is working with at least three financial advisers on a first-round for Yahoo's web business as well as Yahoo Japan before an 11 April deadline.
Yesterday, figures from a book distributed to potential buyers emerged suggesting Yahoo is expecting a 15 per cent drop in revenues this year.
Last month, one of Yahoo's investors, Starboard Value LP, nominated nine directors to overhaul its board.
In a letter to shareholders, the hedge fund said the current board had “failed to deliver results” and significant board changes were needed to “hold management accountable”.
Also in March, eMarketer forecast Yahoo's worldwide net digital ad revenues to fall 13.9 per cent to $2.83bn this year. This compared with a nine per cent growth forecast for Google and 31 per cent for Facebook.