AOL (which, in case you didn’t know, has been the owner of TechCrunch for almost a year now) has announced that its board of directors has given the green light for a stock repurchase program that will allow the company to buy back up to $250 million of its outstanding shares of common stock from time to time over the next 12 months.
The move comes after AOL’s stock took a gigantic nosedive following the reporting of its second-quarter results.
AOL reported revenues of $542.2 million for the quarter, down 8 percent compared to Q2 2010, and a net loss of $11.8 million. The results beat analyst expectations, but investors were unhappy and sent shares to their lowest level since AOL separated from Time Warner in December 2009.
AOL also lowered its outlook for the year, which didn’t help.
A stock repurchase program lets companies buy back its own shares from the marketplace, thus reducing the number of outstanding shares, and is usually authorized when a company’s management believes the shares are undervalued or depressed. The reduction of the float means that even a company’s bottom line remains the same, its earnings per share increase.
AOL share price closed at $10.22 yesterday, down from $15.07 two days ago.
Comments Artie Minson, CFO of AOL:
“This announcement highlights both our strong balance sheet and free cash flow generation. We believe this is a unique opportunity to invest in our company.”
At June 30, 2011, AOL had $458.7 million of cash, while free cash flow was $77.2 million in Q2 2011.