AOL Learning From dot com Farces

AOL has ended it's publicly stated interest in buying Tradedoubler after their initial offer of 215 SEK has been rejected by shareholders.

It's fair enough, the shareholders with their knowledge of the business have rightly or wrongly percieved it's current value higher than the offer.

So why would they do that? Well it's all economics - the shareholders would (I would) look at the market as a whole, look at TD's position in that market and would invisage that the value would be going up higher than their own percieved volatility in the share price and risk of the industry.

If the shareholders didn't need the money why should they sell if the price offered is less than their own valuation?

With 8% of the share capital being owned by individuals and 92% being owned by legal intities (businesses, trusts etc) I would (disagreing with the "efficient market hypothesis") state that the larger percentage of the shareowners have more complete information about the market and the company so would place a greater degree of accuracy with the shareholders decision - especially when you see the names of the top ten largest shareholders.

On the same token, AOL will be doing their own valuation. It's unusual for a company to offer it's true valuation price at the outset so I can invisage there's two main reasons:

1) They need to spend the money elsewhere
2) They've modified their aquisition strategy

With the broadband market as it is and their place within it not so secure they could be looking at shifting markets to secure shareholder value. Now if they've seen a better opportunity elsewhere that will bring a greater return they may be moving their cash to take advantage of that opportunity.

I doubt they've seen anything intrinsicly wrong with the TD business as they would have had to do "Due Diligence" before making an offer. Unless there are any complicated liabilities that aren't immediately obvious.

Now what makes it really interesting is that the shareholders value the business at a price higher than the offer price - which in turn is about 7% higher than the current market price (around 200 SEK). Now that is really interesting.