On May 31st, BloggingStocks' parent company, Time Warner Inc.'s (NYSE: TWX) president Jeff Bewkes publicly mused about taking AOL public, according to paidContent.org.
Bewkes noted that AOL was at a competitive disadvantage due its lack of an "internet public currency." While that currency enabled AOL to offer $166 billion in stock to buy Time Warner back in January 2000, what would it be worth today?
$24 billion. That's one guess made by multiplying my estimate of AOL's 2007 revenues of $6 billion -- calculated by quadrupling AOL's Q1 2007 revenues of $1.5 billion -- by a price/sales ratio of 4. The latter is based on a review of the price/sales ratios of comparable pure-play internet content firms such as:
I think such a public offering could unlock value because at $24 billion, AOL would be worth 30% of TWX's current $80 billion market capitalization, even though it represents only 12.5% of TWX revenues and a mere 4% of its assets. Moreover, AOL stock could motivate staff and fuel acquisitions.
Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Time Warner stock.
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Reader Comments (Page 1 of 1)
6-04-2007 @ 7:30PM
sarah gilbert said...
thanks so much for the analysis Peter! I think I'll hold on to the TWX stock I have in the ESPP... at least for now :)