Chapter 1006 Conditions for Exit

Eric ignored the people with different expressions across the screen, looking a little careless, and said: "So, Steve, you won. I officially announce that starting today, Firefly Investments will no longer interfere in any internal affairs of AOL. , you can manage this company according to your own ideas."

In the conference room in New York, everyone breathed a sigh of relief when they heard Eric's words.

However, listening to Eric's indifferent tone on the speaker, although Steve Case was also relieved, he was followed by a burst of panic.

No one knows better than the CEO of him that the importance of the Firefly system to AOL is definitely not just as simple as the identity of the largest shareholder.

In recent years, in addition to financial support, the Firefly System has spared no effort in tilting AOL's resources in media and technology.

AOL's portal website not only has the same treatment as Yahoo's in the Internet news publishing rights of Firefly Group and News Corporation's media, but also AOL has obtained Yahoo's e-mail, instant messaging and even browser software technology. More than 2,000 patents have been authorized, and the cooperation between the two parties in specific projects such as built-in search engines and online payment platforms is even more intricate.

For most of the cooperation, the resources AOL got far exceeded the price paid. On the surface, AOL took a big advantage, but it also deepened AOL’s reliance on the Firefly system unknowingly.

It is not difficult to imagine that after parting ways, once the Firefly system cuts off the various cooperations established by the two parties, AOL will be far behind Yahoo's Internet media business, and may even collapse directly.

What's more, this situation is definitely not the most serious situation. The Firefly System is after all AOL's largest shareholder, which is the deep-rooted source of pressure for everyone on the scene.

A series of possibilities flashed in his heart, and Steve Case's panic even turned into fear, and he couldn't help but say, "Eric, I think it's necessary for me to explain."

"I just said, I said, you listen," before Steve Case could continue, Eric interrupted him mercilessly, waiting for Steve Case to close his eyes with embarrassment. After talking, Eric continued: "Secondly, I promise here that within two years, the cooperation between several companies in the Firefly system and AOL will not change. Moreover, in order to eliminate a few days In the aftermath of what just happened, Chris Hansen, Ian Grenier, and Robert Iger will announce their resignations from AOL's board of directors at a press conference tomorrow. So, Steve Husband, you've won again, and I certainly won't take control of AOL in a way that could harm this company."

During the initial capital injection, Eric pledged to stay out of AOL's management for three years. The three-year period expired in 1995, and AOL reorganized its board of directors to coincide with the listing.

The Firefly System took three of AOL's 11 board seats.

Chris got a board seat as a shareholder representative, and Yahoo CEO Ian Grenier and abc Group CEO Robert Iger got the other two board seats as independent directors.

Eric originally wanted Katzenberg to join the AOL board of directors, but Katzenberg was based in Los Angeles, and AOL moved its headquarters from Virginia to New York on the eve of its listing, so he left Firefly Group an independent director seat. Robert Iger.

The role of the directors of the board of directors of a large company is to provide constructive opinions for the development of the company, but in fact, they are basically the spokesman for the interests of the major shareholders or management. Even if it is an independent director, it is absolutely impossible to remain independent.

Usually, the board of directors of a publicly held company is actually the core of a company's power, and they have the power to appoint and remove the company's management.

Therefore, every board seat is full of games of various forces, and whoever controls the board seat represents which side actually controls the company.

It was hard for everyone in the conference room in New York to calm down when he heard that Eric would give up the three director seats of Firefly Systems on the AOL board of directors. This news was more surprising and agitated to everyone present than hearing Eric's assurance that the state of cooperation with AOL would not be changed within two years.

Although Firefly Investments relinquishes its seat on the AOL board, it is impossible for anyone to truly ignore the influence of the largest shareholder.

However, giving up these seats means that Firefly Investments has given up the power to directly exert influence on the decision-making level of AOL, and the rights and interests of Firefly Investments, a major shareholder, will be difficult to be adequately protected.

As long as they are willing, other shareholders and management of AOL can easily unite and take measures such as mergers and acquisitions, additional issuance, and introduction of other investors to gradually dilute the shareholding of Firefly Investment, the largest shareholder, and gradually marginalize Firefly Investment. , and may even take some edge measures to directly damage the interests of Firefly's investment.

But now the fact is that Firefly Investments really intends to do so.

Well, no one would think that Eric Williams made this crazy decision because of his own stupidity. There is only one possibility that Firefly is planning to withdraw from AOL, and it is for a short period of time. Quick exit.

From Eric's words just now, it is not difficult for everyone to speculate that the period for Firefly Investments to sell stocks and withdraw from AOL is about two years.

For AOL, a listed company with a market value of US$40 billion, it took two years for the largest shareholder with more than 30% of the shares to reduce and cash out all the shares in his hands. This is definitely very urgent and short-lived.

At least, it can be expected that if Firefly Investments continues to sell large sums of stocks to the public market in the next two years, even if the market is optimistic about this company, AOL's share price will definitely not improve.

Considering these, the faces of AOL shareholders and executives who were just excitedly pondering how to seize the three board seats after Firefly's investment exit became extremely exciting.

"Then, the above is my guarantee, the next step is what you have to do," Eric looked down at the document in his hand, then looked up, noticed the faces of the people on the screen, and said, "You must have guessed something. The current situation is that Firefly Investments holds 32.6% of AOL's shares, totaling 53.79 million shares. Since 1992, in order to show its support for AOL, Firefly has never reduced its holdings even three years ago when the company went public. Over any AOL stock, it has continued to increase its holdings. But now, since everyone can’t reach an agreement on the company’s development direction, Firefly will no longer insist on its status as the largest shareholder.”

In fact, Firefly System holds a total of 58.9 million AOL shares, accounting for 35.7% of AOL's total share capital of 165 million.

However, another 3.1% of the stock is in the hands of Clover Fund, a subsidiary of Firefly Group.

If the shareholding is less than 5%, according to the Federal Securities and Exchange Act, Firefly does not need to report to the Federal Securities and Exchange Commission (sec), nor does it need to inform other AOL shareholders and management if it is not necessary.

Although many people at the scene knew that Firefly System also held a large part of AOL's stock, but since Eric ignored this part of the holding, everyone would not take the initiative to mention it.

But even so, everyone was a little terrified to imagine that a third of AOL's total equity could be flooded into the market.

Historically, the stock market crash that caused the Great Depression of the entire U.S. economy in 1929 was caused by the frantic reduction of holdings by major shareholders. After the stock market crash that year, in order to maintain market stability and protect the interests of small and medium shareholders, SEC imposed very strict restrictions on the reduction of major shareholders of North American listed companies.

If AOL’s largest shareholder like Firefly Investments wants to reduce its holdings through the secondary circulation market, it must first submit a report for the reduction of its holdings to SEC, and disclose information such as the reduction of shares and the reasons for the reduction to the market. Secondly, Firefly Investments must also disclose the operating conditions and financial data of AOL in the recent period to prove that the major shareholders did not reduce their holdings because of the inside information in advance.

However, these restrictions are, in the final analysis, only to prevent major shareholders from deliberately infringing on the interests of other shareholders and investors.

But stocks are private property after all. As long as the reduction of major shareholders is formal and legal, even if the stock price of the company involved may plummet or even collapse, others have no right to stop it.

All AOL stocks held by Firefly Investments are common stocks that can be freely traded. At the same time, AOL went public three years ago, and the stocks held by Firefly Investments have already passed the six-month lock-up period, and they can fully reduce their own losses. Hold selling.

Imagining the various situations that may be faced, someone in the conference room quickly said, "Eric, you want to sell all your stocks in a short period of time. This is not realistic at all. Have you considered the consequences?"

Eric listened to the sound coming from the stereo here, looked at the monitor, and was talking about a middle-aged man with a bald head. Eric vaguely remembered seeing him three years ago during the listing process of AOL. It seemed that is the president of First Boston Investment Bank.

Ai Rui didn't ask the other party's name, but said: "Of course I have considered it. All the words I said today have been carefully considered."

His thoughts were interrupted, Eric looked down at the document in front of him again, and then continued: "My decision now is that Firefly Investment will reduce its holdings of 16.5 million shares in the first batch. I want you to follow this part of the stock. As for How much each of you plan to undertake, this is your business, I will give you one month, after one month, if there is no affirmative answer, Firefly will choose to sell to the open market."

16.5 million shares, or exactly 10% of AOL's total share capital.

At the current share price of AOL, the stock is worth about $4 billion.

For the major investment banks and funds that hold AOL stocks, $4 billion is absolutely impossible for them to come up with in the short term. However, if it is apportioned, although it is still a lot of business, they can still afford it.

However, that is not what everyone considers.

After reducing 16.5 million shares, Firefly Investment still has more than 37 million shares left. How does Eric Williams plan to deal with this part of the stock, do they want them to continue to take over the next two years?

The Nasdaq is now approaching 2,000, and everyone understands the cost of a serious bubble.

Not to mention anything else, just AOL.

Based on recent AOL market cap and earnings estimates, the company has traded at 131 times earnings, which was absolutely unimaginable a few years ago.

In previous years, even for companies with very good development prospects, the price-earnings ratio often did not exceed 30 times. For many investors, the price-earnings ratio of a company exceeds 30 times, and the investment risk becomes very large. Now, the price-earnings ratio of AOL has exceeded 131 times, and the risk is self-evident.

Although countless media and investors are advocating that investing in technology stocks is investing in the future, the current profitability of these high-tech companies cannot be used to judge the prospects of this industry. But in fact, everyone knows the frightening bubbles behind the high stock prices of these companies.

At a price-earnings ratio of 30 times, AOL's market value should be only $9 billion, and even if that's an overestimate, AOL's market value is now around $40 billion, more than four times its normal value.

In this serious bubble background, no one knows how long AOL's current high stock price will last.

Therefore, although all the shareholders in the conference room of AOL's headquarters in New York have obtained substantial paper gains from the continuous rise of AOL's stock price in recent years, at this time, let them spend 4 billion US dollars to buy Eric's offering 16.5 million shares, most people are still very resistant.

In the eyes of many people, this money is actually enough to buy half of AOL.

However, if they are unwilling to take over, they will face a public sell-off of Firefly Investments.

They also know that Firefly Investments will not recklessly dump all stocks at one time, but that kind of continuous selling for a long time is more painful. Faced with the long-term uninterrupted influx of buy orders into the circulation market, AOL’s stock price thinks It is impossible to think of any improvement.

Everyone was silent for a moment, and Morgan Stanley President John Mark, who was familiar with Eric, asked, "Eric, at what price do you plan to sell these stocks?"

"If you agree now, $4 billion." Eric looked at it and said, "If you plan to consider a month, then settle at the stock price a month later."

John Mark immediately shook his head and said: "Eric, this is too expensive. Everyone knows the actual situation of AOL, let alone such a large stock transaction. If you are willing to give a discount, I can represent it now. Morgan Stanley subscribed for 3 million of them. So, I think a 30% discount is a price that everyone can afford.”

John Mark's voice fell, and everyone in the conference room nodded in agreement.

They also know that to avoid the long-term downturn of AOL’s stock price due to the continuous reduction of Firefly Investments, it is inevitable for this part of the stocks to be sold by Firefly Investments. But if Eric is willing to sell the stock at 70% of the current price, they are still very willing to take over, even if Eric sells more shares.

Based on AOL's market value of $180 billion at its peak in memory, the total value of AOL's shares held by Firefly Systems will exceed $60 billion.

However, even if Firefly invests 1% of AOL's shares into the circulating market in one day, it may crush AOL's stock price, let alone sell all 35.7% of its stocks at the highest point of the stock price. .

Eric has never been a greedy person. For the AOL stocks in his hands, as long as he can cash out 10 or 20 billion US dollars in funds in the next year or so, he will be satisfied. After all, the actual value of AOL is not even worth 10 billion dollars in Eric's view.

If he does not know the growth potential of AOL's share price in the next two years, Eric is indeed willing to sell his stock at a lower discount price. Of course, he will certainly not accept the diving price of 30%.

But at this time, Eric did not intend to make any concessions, but shook his head firmly and said: "If this is the case, then you can consider it for a month, come here today, and you can talk to Chris about the rest. ."

Just as he was about to hang up the video, Steve Case, who had been silent for a while across the conference table, finally spoke again: "Eric, what about the remaining stock beyond the 16.5 million shares, what are you going to do with it?"

Eric glanced at Steve Case, then glanced at the people in the conference room opposite, and said: "The rest of the next year will be discussed, it will be in half a year, it is still 16.5 million shares, you choose to accept Or not. I just said that I will not do too radical behavior, but you must also pay the price you deserve for maintaining the current state."

Abandoning these words, Eric ignored the crowd and turned off the video call.