| User | Post |
|
8:07 pm
December 3, 2009
|
Jae Jun
| | |
| Admin
| posts 1336 |
|
|
good point. AOL certainly isn't an easy business to determine. Has anyone looked at who will be running the company?
What are his incentives? Is there a large performance compensation package waiting for management as suggested in Greenblatt's book on spinoffs?
|
|
|
10:38 pm
December 2, 2009
|
Pete
| | California | |
| Member | posts 5 |
|
|
There is a counterpoint to the Barrons article in the Heard on the Street section of Wednesday's WSJ. It brings up some good points about regular occurrences of "one time" charges related to the downsizing on AOL.
In the Barron's piece they mention AOL bringing in just under $1b in FCF next year, off a market cap of $2.4b. I'm assuming that does not include selling off Mapquest or any of their other businesses. I did a back of the envelope DCF assuming they bring in $900M in 2010, and that FCF falls by half (severe assumption) each year to 2013, then goes to zero. With a 12% discount rate those cash flows are worth about $1.5b. I have no idea what Mapquest, etc, might be worth, but I think $900m ($2.4b market cap – $1.5b DCF) sounds low. Maybe someone could shed some light on what they would fetch if sold.
My problem with this whole idea is that management probably won't operate this company as a run-off where FCF is returned to shareholders as the business winds down. One dumb acquisition could ruin the whole investment.
|
|
|
4:25 pm
November 30, 2009
|
Jae Jun
| | |
| Admin
| posts 1336 |
|
|
I'm not too sure about the "when issued" shares as well. All I know is that the general public wont be able to trade it until the offical public date when it trades on its own ticker.
Usually looking at previous spinoffs, everybody starts dumping on the first public day.
As for valuation, the article makes a good point by going through the different parts of AOL. Doing a DCF, Graham or EPV wouldn't be ideal because the truth is AOL is a shrinking business.
So the way to value it would be a sum of parts valuation. Look at what each subdivision of AOL is worth, add it all together, apply the appropriate discount multiplier depending on what the business is and then add together.
|
|
|
11:31 am
November 30, 2009
|
Sid
| | |
| Member | posts 33 |
|
|
I have no experience with spinoffs thus far but am wondering how this process works. The shares are trading on "when issued" basis under aol-wi. How does this work? Are time warner holders getting shares as the week goes on and everybody will have received them by December 9th? Also, does anybody have experience watching these large spinoffs? Do institutions only start dumping their shares when it officially starts trading or as soon as they are issued the shares(basically questioning liquidity)?
|
|
|
3:01 am
November 29, 2009
|
Jae Jun
| | |
| Admin
| posts 1336 |
|
|
Please don't say you're a newbie because newbies usually don't ask questions to begin with.
And I appreciate you bringing up AOL. I had planned to look at it because I think this will be thrown out big time by time warner holders people during the distribution.
|
|
|
9:48 pm
November 28, 2009
|
Sid
| | |
| Member | posts 33 |
|
|
I'm a newbie so as usual I apologize if this is a dumb post. Latest article in Barron's comments on the AOL spinoff:
http://online.barrons.com/arti…..ps_popview
Any thoughts?
|
|
Home
