Amazon Too Pricey to Make AOL Investment Work
 |
| Related Stories |
| Scent of Charred Greenbacks Wafts Over Amazon.com |
| Amazon Too Pricey to Make AOL Investment Work |
| With Amazon Deal, AOL Remains King of the Jungle |
| Value Funds Still Not Dipping a Toe Into Amazon |
| Cramer: The Simple Truth About Amazon (Premium) |
| Amazon Looks Good Only if You're Wearing Rose-Colored Glasses |
Amazon shares plunged 21% Tuesday morning after the Seattle-based company's Monday evening forecast of weak third-quarter financial results. As part of a broad e-commerce deal, AOL agreed to invest $100 million in Amazon stock at up to $15.28 a share, a 10% discount to Friday's closing price.
The bull spin: A savvy buyer of tech doesn't believe Amazon is going bust. The bear take: Amazon couldn't persuade AOL to pay a premium, a decision that looks good for AOL now that Amazon stock has fallen to around $13. It now appears likely that AOL will end up paying a price based on Amazon's five-day average close through next Monday, a price that is likely to be rather less than $15.28.
But AOL will go down as having paid too much, even at these prices. Amazon stock is still expensive, and the company's balance sheet suggests Amazon is getting squeezed by vendors wary of extending credit. As a result, AOL's prospects of seeing its Amazon stock appreciate aren't good.
Seeing Red
...Recent Comments
| Dow Jones | S&P 500 | NASDAQ | 10-Year Note | |
|---|---|---|---|---|
| 10,310.91 | 1,095.90 | 2,184.91 | 33.88 |
Oil *
75.54
|
|
DOWN
79.20
|
DOWN
7.35
|
DOWN
4.70
|
DOWN
0.60
|
10 Yr
3.39%
SPDR Gold
112.80
|
|
-0.76%
|
-0.67%
|
-0.21%
|
-1.74%
|
Data delayed 20 minutes |
Connect with TheStreet