AOL Shares Climb Following the Announcement of $500M Special Dividend
Shares of AOL (NYSE: AOL) traded up Monday following the announcement of a special program to return $1.1 Billion to shareholders.
There are two major components to the program. The first is a repurchase agreement where the company will buy back roughly $600 million of stock, most of which will be re-purchased by the end of the year.
The second part of the program is a one-time special dividend of $5.15 per share. The dividend is valued at roughly $500 Billion, and is scheduled to be paid out on December 14.
In April, the Company sold 800 of its patents to Microsoft (NASDAQ: MSFT) for $1.06 billion, promising to distribute the earnings to shareholders. AOL was pushed towards the deal by Starboard Value LP, an activist investor that owned roughly 5.1% of the company. Starboard demanded AOL sell its patents and pass the returns onto investors.
As a result, the company announced that it would ask shareholders for the ability to amend shareholder rights. The amendment would limit any single shareholder to owning 4.9% of the company unless they received approval from the board of directors.
AOL's Chairman and Chief Executive Officer, Tim Armstrong commented that “Since becoming a public company in December 2009, we have demonstrated an ability to both unlock and prudently manage our valuable asset portfolio, including our tax assets. Today we have done both again, outlining a clear path to returning $1.1 billion in cash to shareholders, while putting in place a necessary mechanism to ensure the preservation of our valuable tax assets.”
Shares of AOL have nearly doubled since the company announced the sale of 800 patents to Microsoft in April. Following the announcement on Monday, AOL's stock continued to soar. Amid four quarters of cost cutting, is a big asset sale truly something to be celebrated?
Judging by share prices, investors seem to think so. Regardless, AOL has successfully pleased investors and gotten back into the spotlight. Perhaps it can use the attention to attract interest in new product offerings, or perhaps the asset sale is just a springboard for a new strategy. Either way, investors will probably have to wait until AOL's third-quarter earnings report for any answers.
Shares of AOL traded up Monday a little less one percent around $33.65.
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