Does AOL’s Huge Stock Decline Make It a Bargain Acquisition Target?
In the last month, the stock of AOL has declined just over 50 percent.
But that drop is not just due to the turbulent markets of late. AOL stock had a 50 percent drop over the last six months, a 57 percent decline since the beginning of the year, and a 56 percent plunge since it went public in late 2009.
Which is why some in the industry — at private equity firms and bigger companies — have noted to me that the price of AOL might have gotten low enough for a very cheap takeover.
“You have to look, even with all the problems they have been struggling to fix,” said one person, who also underscored the advertising and other challenges that AOL faces. “But it is so inexpensive, it’s also an interesting idea.”
Said another large investor: “It’s almost free, given its cash on hand.”
Indeed, since in its recent second-quarter earnings report, AOL said that, as of June 30, it has $458.7 million in cash.
That matters, since at $10.22 a share — a far cry from its $28.45 high of all time in late April of 2010 — the market valuation of the New York-based Internet giant is only $1.09 billion.
You do the math.
To give that number perspective, AOL paid out $315 million in cash to buy the Huffington Post in the beginning of this year. And, let us not forget, under different management, AOL forked over $850 million in cash to buy the Bebo social network in 2008, and sold it for a song last year.
Even AOL thinks the price is low, announcing a $250 million stock buyback program this morning, just as shares hit their lowest point ever yesterday.
The stock is up today, though still in the basement.
To be fair, comparable companies’ valuations have also taken a hit recently. Yahoo shares are down 29 percent since the beginning of the year, giving it an affordable $15.3 billion valuation; and Demand Media’s stock has dropped 63 percent in that period, making its current price tag only $703 million.
Calling all shoppers?