Steve,
Let me take your points one by one:
"You don't think insiders would be selling if they were negotiating the sale of the company."
---Yes, you are right. If AOL were to be bought up by another company, it probably would be at a lesser than current market value. However, I think if that happened, AOL investors would be so outraged over AOL's execs selling at the recent high price, that I had ruled out that possibility. My conclusion therefore, is that AOL will not be bought out.
"All the SEC ruling does is bring AOL in line with other corporations. AOL historically has a bad habit of capitalizing short term expenses to enhance earnings"
---Yes but also the SEC ruling, as I pointed out, will take away an estimated $.02 per quarter from earnings, for the next five years. This is my number one reason, which I believe, precipitated the AOL insider sales at this time.
"You don't think AOL execs would have sold if they were going to spilt the stock. Check the EDGAR filings. You'll find a proxy cover letter for the upcoming annual meeting that discusses a 2:1 split and the proxy itself with an item authorizing doubling the number of authorized shares."
---I did not know about a discussion of a 2 for 1 stock split. While I did know that AOL's management is seeking a doubling of its authorized shares, I assumed that this was for an eventuality, and NOT necessarily that the stock would be split anytime soon.
"I would suggest that Case and company are selling for a couple of reasons. First, as long as the finalized earnings were delayed, the quiet period continued and they couldn't sell and this is Case's first big payday."
---I Agree.
"As for AOL's earnings, the stock price is so far ahead of earnings that as long as they have some, Wall Street brokerages houses will keep recommending AOL as a brand name Internet stock."
---Yes, the stock price is very far ahead of earnings, for sure. However, I believe, that not only will AOL have to show earnings, but they must show increased earnings in accordance with analyst's ever increasing estimates. It is for this reason that I think that the surprise of the $.08 a year impact from the SEC ruling, will eventually take its toll. It will take just one slip in earnings and the P/E of AOLwill be reduced from a 300 plus, to a 50 minus P/E multiple
Best,
Jules
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