AOL to Buy Back Shares as Stock Hits Lowest Price Since Time Warner Separation

NEW YORK - After its stock hit a new low this week following its latest quarter results and business outlook, AOL said Thursday that its board has approved a $250 million stock buyback program.

Such programs typically come to underline a management team's confidence that its stock is undervalued, and the news did indeed push AOL shares higher amid broader market gains. They closed at $11.47, up 12.2 percent.

AOL's stock on Wednesday had dropped 8.7 percent to close at $10.22 after hitting $10.06 earlier in the trading session - a 52-week low and the lowest price since the online company's separation from Time Warner.

A day earlier, its stock had already been in freefall after Wall Street wasn't happy with some second-quarter results and the company's latest outlook. Wall Street observers have increasingly seemed unsure about the company's ability to turn around its business despite the much-touted $315 million acquisition of the Huffington Post earlier this year.

“We believe this stock repurchase makes sense for both our company and our shareholders” said AOL chairman and CEO Tim Armstrong. “We are continuing the disciplined execution of our strategy and have confidence in our future growth prospects.”

“This announcement highlights our strong balance sheet and solid cash flow generation,” added CFO Artie Minson. “We believe this is a unique opportunity to invest in our company.”

Big entertainment companies have also used buybacks and higher dividends to reward shareholders.

Under the buyback program, AOL can repurchase up to $250 million of its common stock over the next 12 months.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai