Sunday, June 24, 2012

AOL Decides Stock Repurchase Not Dividend is Way to Handle $1 Billion Patent Proceeds

On June 17, I posted an article here that AOL had expressed a commitment to return 100% of the proceeds from its $1 billion patent sale to its shareholders. Initially, I thought that's a real gain for shareholders whose stock has dropped about 20% in the last five years. Later I read the dividend may have been prompted to appease the hedge fund Starboard Value that pushed for the patent sale.

Ten days after AOL reelected eight directors it announced a stock repurchase not a dividend is the best way to handle the patent proceeds. CEO Tim Armstrong's timing seems to have outfoxed Starboard Value which pushed for a board seat and the dividend. Some speculate Starboard Value will sell its AOL shares (about 5% of that outstanding) now that AOL has decided to not distribute the dividend.

If you are interested in the details, I recommend reading All Things D Kara Swishers article: AOL Will Start Paying Out Its Pile-O'-Patent-Cash to Shareholders This Week Via Stock Buyback.

Copyright © 2012 Robert Moll. All rights reserved.