SAN FRANCISCO -- With shares of Yahoo! ( YHOO) continuing a staggering fall, one investor is now urging Microsoft ( MSFT) to use it as an entry point for another acquisition bid.

Mithras Capital, which owns 1.9 million shares of Yahoo! - or about .14% of the company -- proposes in a letter to Microsoft and Yahoo! that the Redmond-based software company purchase the Internet giant for $22 a share. That's far lower than the $33 that Microsoft had offered earlier this year but still an 81% premium over Yahoo!'s current stock price.

Yahoo! has fallen below its five-year low in the last couple of days as the market continues to take a beating amid unrelenting investor fears, along with analysts' concerns that the company will be hurt by weakening display advertising spending. On Friday, the stock was down 3.9% to $12.16 in intra-day trading .

Mark Nelson, a partner for Mithras Capital, maintains that $22 a share is a fair price for Yahoo! when valuing the different parts of the company separately.

"Six or nine months ago when the multiples were higher, $29 or $30 made sense," he said in a phone interview. "A reduced price does seem logical. It's a premium most Yahoo! shareholders would welcome and it's still equal to the price that Yahoo! was trading at Microsoft's original bid."

Yahoo! was trading at $19.18 on Jan. 31 when Microsoft offered an unsolicited bid of $31 a share for the company. Microsoft later bumped the price to $33 but the two sides could not reach an agreement.

Yahoo! shares had climbed as high as $29 a share when a deal with Microsoft seemed within grasp. But the stock plunged 10% when talks fell apart, and it has been on a downward slide ever since.

Mithras Capital proposes that if Microsoft acquires Yahoo!, it should unload the company's Asian assets and non-search businesses for a savings of $3 billion. It could also receive $2.8 billion in tax benefits, reducing its price to purchase Yahoo!'s search business to $10.3 billion.

Both Microsoft and Yahoo! declined to comment on the proposal.

Nelson says that although Microsoft could attempt to offer an even lower price than $22 for Yahoo! given the recent fall-off in its shares, he believes that most investors realize there's a lot of panicked selling going on right now.

"Up around $15 or $16 is where fair value is and there should be some acquisition premium because it would benefit Microsoft and the synergies would make sense," he says.

As for the search agreement that Yahoo! has entered with Google ( GOOG) -- which allows Yahoo! to outsource some of its search ads to its rival and share the revenue - Nelson says Yahoo! could easily back out of the agreement and pay a $250 million termination fee.

"In the big scheme of things, it's not a large amount of money," he says, further noting that the Justice Department's ongoing scrutiny of the search deal could give Yahoo! a handy excuse to break the agreement if necessary.

Nelson says he does not think that a Google deal with Yahoo! makes better sense than one with Microsoft.

"With the Google deal, Yahoo! would have some additional upside and the stock would trade in the $15 to $16 range but I don't think it's a good long-term strategy," he says. "In a lot of ways, it hobbles (Yahoo!'s) go-it-alone search strategy idea."

The Google deal is just another way of getting Yahoo! out of the search business, Nelson says, "but in a way that's less powerful to Yahoo! investors."

Activist shareholder Eric Jackson, who had long advocated for a deal between Yahoo! and Microsoft, says he sold his Yahoo! stake that he held through his hedge fund last month when the stock hit $20, but still holds a small amount personally.

"I had no idea it would fall this much but I finally decided to stop pushing a rope by calling for change from the inside (as a shareholder)," he wrote in an e-mail. "I voted with my feet. This board has the blood of its shareholders on its hands and I hope they wear that scarlet letter stigma for a long time."

Jackson said he wishes Nelson well with his proposal, but added, "If I was in Redmond, I'd say why not wait a few weeks and pick this company up for a couple of bucks."