Shorts rush out of Microsoft (MSFT) and into Yahoo! (YHOO)

Short sellers must be betting that there will not be any deal between Microsoft (NASDAQ: MSFT) and Yahoo! (NASDAQ: YHOO). That would leave Carl Icahn holding a lot of stock without a profit.

Short sellers reduced their position in Microsoft by 25 million shares as of May 15 compared with April 30. That brought the total short interest in the world's largest software company down to 73.4 million.

Over at Yahoo!, short interest rose 9.3 million to 47.3 million. That was the largest increase for any company traded on Nasdaq during the May 15 period.

Short sellers may be admitting what Yahoo! shareholders cannot bring themselves to believe, at least not yet. With no bid from Microsoft likely, Yahoo! has no other buyers. The company can do little to keep its share price from drifting back to the $20 range, especially if its Q2 numbers are weak.

Icahn can win his board seats in a proxy fight against the portal company. He will not be able to do anything with his influence if he gets it. He can't sell what no one wants.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 newsletter.