Yahoo shares have dived more than four per cent in early trading in New York after disclosing a second major hack attack, twice the size of the previous one it revealed earlier this year, and which experts are calling the biggest hack in history.
The revelations that user accounts were compromised come at a crucial time for the already troubled company which is the target of a takeover offer by US telecoms giant Verizon, as well as putting chief executive Marissa Mayer's leadership under the microscope once again.
The hack has cast doubts over the future of the $4.83bn deal for Yahoo's search, mail and messaging assets, among other parts, with suggestions swirling that Verizon already lowered its original bid in the wake of the first hack disclosure.
Verizon said it will "review the impact of this new development before reaching any final decision".
Richard Windsor, analyst at Edison Investment Research said it was Verizon's "fiduciary duty to its shareholders to at least demand a discount on the acquisition price," after the latest security breach, or it risked an "ignominious write off not unlike that suffered by HP after its acquisition of Autonomy".
And the potential threat to the deal leaves beleaguered boss Mayer's position at the top in doubt.
"I think if the deal gets pulled, she will have to fall on her sword," said Northern Trust Capital Markets analyst Neil Campling.
"She tried to revitalise the company and was not successful, and her primary responsibility was then to dress it up for sale. If that gets pulled she is in a very compromised position."
Mayer joined the firm from Google in 2012, the year before the most recently discovered hack took place.
A major part of Verizon's interest in the internet firm would have been the size of the user base, said Campling, and with the hack likely to provoke a backlash among users, it will become less valuable.
"It's certainly embarrassing for Yahoo. On repeat occasions, it suggests poor management and execution around customer data – that’s the most valuable asset to put at risk."
If the deal were to be called off, a write down of the business within Yahoo would be unlikely, however, "as the core business now makes up only a tiny part of the valuation of the company" said Windsor.
"… even in the advent of Verizon walking away and the core business imploding, there is still significant upside in the shares," he said. A large part of Yahoo's valuation is based on owning a stake in Alibaba and Yahoo Japan.
Data from one billion accounts was stolen in 2013, Yahoo discovered on Wednesday, in addition to a breach of 500m user accounts in 2014, revealed in September.
The number of exposed identities stood at 429m worldwide in 2015, according to security researchers Symantec. It estimates that number to be more than half a billion in total, taking into account the number of breaches which are only partially revealed, or not disclosed at all by companies.
More Verizon shares were up 0.71 per cent higher in early trading at $51.99 while Yahoo shares were down 4.57 per cent to $39.04.