+

Cookies on the Business Insider India website

Business Insider India has updated its Privacy and Cookie policy. We use cookies to ensure that we give you the better experience on our website. If you continue without changing your settings, we\'ll assume that you are happy to receive all cookies on the Business Insider India website. However, you can change your cookie setting at any time by clicking on our Cookie Policy at any time. You can also see our Privacy Policy.

Close
HomeQuizzoneWhatsappShare Flash Reads
 

Investors think a bidding war is going to erupt over AOL, and that Verizon's $4.4 billion won't be enough

May 12, 2015, 22:51 IST

This morning, AOL announced that it has accepted Verizon's $50 per share acquisition offer.

Advertisement

Normally, investors would react to that kind of news by buying up AOL stock until its price was just under $50 per share.

That's not what happened today.

Right now, AOL share price is above $50 - at $50.57.

Why?

Advertisement

We asked a bunch of people close to the company, investment bankers, and hedge fund traders.

The consensus speculation is that traders are betting that another bidder for AOL is going to emerge, and offer a price that's higher than $50 per share.

Who are these potential suitors?

These are the names people tossed at us: Time Warner (!), Comcast, Yahoo, Alibaba, Softbank, AT&T. One trader source even mentioned Netflix and Apple.

There are two reasons why traders think so many companies should want to buy AOL:

Advertisement
  • The first is that cable companies and telecoms are going to have to figure out how to make money off of mobile video, and that AOL's advertising technology can help solve that problem. Also, maybe AOL's subscribers paying for Internet access could easily be converted into video content subscribers.
  • The second: the news that AOL is in talks to spin off Huffington Post at a $1 billion valuation have some people believing that AOL would be worth more than $4.4 billion if it were acquired and then broken up.

One dealmaking source we talked to thinks investors betting on AOL finding a higher bidder are fooling themselves.

This source says that late, surprise bidders normally only appear after companies that were not thought to be for sale announce their sale.

This source says AOL has been on the block for a long time, and that if another bidder was going to emerge, it already would have.

"Often times in situations like this, the arbitrage community gets ahead of itself. My guess is that's probably the case."

"I can't believe someone is going to go, 'Oh geez, didn't know it was for sale.'"

Advertisement

Jon Marino contributed additional reporting to this story.

NOW WATCH: How one simple mistake cost 'Real Housewives' superstar Bethenny Frankel millions

Please enable Javascript to watch this video
Next Article