Kara Swisher

Recent Posts by Kara Swisher

AOL Will Start Paying Out Its Pile-o’-Patent-Cash to Shareholders This Week Via Stock Buyback

For those AOL shareholders waiting for a juicy dividend after the Internet company’s billion-dollar sale of its patent portfolio to Microsoft, it appears you’ll have to get your gains via a stock buyback that will be announced by the end of this week.

According to sources close to the situation, after evaluating tax considerations and talking to major shareholders, New York-based AOL has decided that share repurchase is the best way to realize its gains from the $1.056 billion sale of its lucrative intellectual property of about 800 patents and nonexclusive licensing rights to those the company continues to hold.

The patent sale undoubtedly helped AOL CEO Tim Armstrong in the company’s victory in defeating an activist shareholder assault from the hedge fund Starboard Value and re-electing its eight directors 10 days ago, as well as giving its stock a boost of almost 80 percent since the beginning of the year.

Even without a dividend, the impact on AOL shares from a large buyback could be significant. Various Wall Street analysts have pegged the value of the patent payout at about $11 per share, but that is not exact.

The sale of AOL patents to Microsoft officially closed on June 15.

At the time, AOL said, as it had previously:

“AOL is committed to returning 100% of the patent proceeds to shareholders. AOL’s Board and management team are currently working on determining the most efficient and expedient method to return the proceeds of the patent transaction.”

Of concern, of course, is the possible impact if Starboard decides to sell its 5.3 percent stake in the company. That could presumably be assuaged if AOL includes one of Starboard’s nominees from its alternate slate in a current hunt for two new board members.

But sources said that was unlikely and that AOL expects the disgruntled — and defeated — hedge fund to shed its stake.


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