Yahoo's shares fell by more than 15% in New York after software giant Microsoft scrapped its three-month-old bid to buy the internet firm.
The deal collapsed after the two sides could not agree on the sale price.
Microsoft boss Steve Ballmer formally withdrew the offer in a letter this weekend to Yahoo's head, Jerry Yang.
However analysts said that that the share price dip was not as severe as expected - fuelling expectation of a potential further bid later.
"I was expecting to see a more extreme reaction to Microsoft's withdrawn bid", said Clayton Moran, an analyst with Stanford Group.
"Microsoft is trying to make it seem like it's not coming back (with another bid), but this somewhat muted reaction shows the market isn't buying it."
Meanwhile Friedman, Billings, Ramsey & Co analyst, analyst David Hilal said that "Microsoft could re-enter the picture, essentially playing the role of the white knight".
Yahoo shares initially fell by 20% but pared some of their losses to close 15.6% down at $24.22, erasing a big chunk of the 50% gain made since the takeover approach.
In Frankfurt, Yahoo's shares ended down 12.59% at 15.83 euros ($24.52).

Analysts said Yahoo could face legal action from shareholders after rejecting the bid.
Microsoft had wanted to do a deal to be able to compete with Google, which dominates the lucrative market for internet advertising.
This market was worth $40bn in 2007 and is predicted to double to $80bn by 2010.

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