Yahoo's shares rose by 3.3 percent last Thursday, following news of a potential takeover.
Reports are emerging that Alibaba, China's biggest e-commerce site, and Softbank, a Japanese telecommunications company, are preparing a bid to buy Yahoo in its entirety.
The two companies have been in talks with private equity firms Blackstone and Bain Capital. But a spokesman for Alibaba is denying that plans for a bid are concrete, saying: "Alibaba group has not made a decision to be part of a whole company bid for Yahoo".
Yahoo has been leaning towards selling a minority stake of the business to an investor group, but in doing so might be making themselves vulnerable to takeover bids from their Asian partners.
If Alibaba and Softbank were to bid for Yahoo, they would reclaim the companies minority stakes in their shares.
The two Asian partners presented a complex proposal to Yahoo last month to buy out its stakes in their companies, but Yahoo has not reached any substantial agreement with them since.
Reports suggest that the two companies might pay up to as much as $20 a share, which would value the company at 24.1 times its earnings in the last year.
Yahoo has received two proposals for minority investments in the past week, from TPG Capital and investor group Silve Lake. But if Alibaba and Softbank were to make a bid, their offer would value Yahoo much higher than competitors.
Discussions are continuing among the Yahoo board, but at the moment no proposal has been accepted, and they have declined to comment on their progress.
The two companies came together after Yahoo bought a 43 percent stake in Alibaba in 2005 for $1 billion. However, relations between the two companies have deteriorated since then, and it has been suggested that Alibaba's interest in bidding is to regain control of their company.
"Alibaba definitely wants to get its stake back from Yahoo, so whatever can make it happen, they will try for it", JP Morgan's Dick Wei commented from Hong Kong.