A little-known activist fund that has a stake in AOL has targeted the online company, led by chairman and CEO Tim Armstrong, arguing that its strategy of investing in content businesses isn’t paying off, the Wall Street Journal reported.
The fund, Starboard Value, is one of AOL’s largest shareholders with a stake of about 4.5 percent and late Tuesday sent a letter highlighting its concerns to Armstrong, it said.
AOL’s focus on transforming itself from a subscription-based dial-up access business to an ad-supported media player is destroying shareholder value, the fund argues in the nine-page letter.
Starboard managing member Jeffrey Smith in the letter says that AOL is “deeply undervalued,” suggesting that its $1.4 billion market capitalization reflects only the value of its cash and dial-up Internet access business, according to the Journal.
AOL’s online media businesses are getting ascribed no value from investors, the fund suggests.
The comments echo concerns among AOL investors and analysts who have wondered if and when the company’s attempted turnaround will bear fruit. The stock has fallen nearly 70 percent this year.
Starboard didn’t push though for the sale of money-losing businesses or the whole company as some others have suggested, the Journal said.
AOL couldn’t be reached for comment late Tuesday, the paper said.