It’s been a long decade, but AOL will once again be an independently traded company on December 9, when Time Warner will spin off shares. Every Time Warner shareholder (disclosure: including me, from when I was employed there) will receive shares in AOL using the following formula: one share of AOL will be distributed for every 11 shares held in Time Warner.
In other words, we finally have an approximate market capitalization for AOL. The business will be valued at
1/11th 1/12th the value of Time Warner. At today’s market cap of $37.8 billion for Time Warner, based on a closing price of $32, that implies a $3.4 $3.15 billion market cap for AOL. Unless Time Warner shares surge over the next few weeks, it will be in that ballpark. Update: My initial math was slightly off. As some commenters point out, the implied value is 1/12th of Time Warner since at the time of the distribution everyone with 11 shares will receive an additional share. SInce we know how much Time Warner is worth, it is possible to come up with an implied value for AOL based on that ratio, even though that value will change the minute the shares start trading.
So the AOL business which was valued at $5.7 billion just last July when Google sold back its 5 percent stake, is now worth even less—not to mention the initial $20 billion valuation when Google first invested in 2005 or, going back even further, the original $109 billion merger with Time Warner way back in 2000.
But let’s forget about all that. Onwards and upwards. With a little cost-cutting, those AOL shares will shine. Right?