As an example - imagine a company with a billion $ in cash. If investors believe that the company will be wasteful with that money (for example by making poor acquisitions as is sometimes the case with companies with an excess of cash) then investors will value the company at less than a billion $.

I've heard it said that stock price is the market's best estimate of the NPV of future cash flows. If that's true, does that mean that the market expects some of Yahoo's cash to disappear? I can imagine ways that it could: lawsuits, golden parachutes, maybe even stupid acquisitions...

In general, though, the market is not as rational as it's credited with being. Perfect information never exists, and emotion can distort prices; think of Black Tuesday, or all stock-market bubbles, or how MLPs are falling right now because of problems with Kinder Morgan (which isn't even an MLP in the first place).

One obvious reason would be if they don't trust the book value. For example, if the assumptions made in computing the book value are systematically wrong in some way.

I didn't realize Wall Street had to make sense. Is that a new rule?

Taxes. You might have to pay extra to convert assets into cash.

you usually bad mouth things you want to buy. it brings the price down.