America Online said today it completed a US$500 million offering of new stock, bringing in a bundle of cash that could mean acquisitions to keep pace in the deal-happy Internet industry.
The company sold about 4.9 million new shares of common stock in a block trade underwritten by Morgan Stanley Dean Witter and Lehman Brothers. Shares sold in the offering account for about half the new stock AOL registered with the Securities and Exchange Commission in a filing earlier this month. There has been no announcement as to when the remaining shares would be issued.
The offering increased AOL’s (AOL) 220 million shares outstanding by about 2 percent.
While an increase in shares typically leads to a drop in price, AOL’s stock rose $3 to $106.25 on the New York Stock Exchange. Analysts said Wall Street believes the company is ready to use its $1 billion in cash and its rocketing stock as currency to buy other Internet companies.
"They want to be in a position to be opportunistic and nimble with acquisitions," said Paul Noglows, an analyst with investment bank Hambrecht & Quist.
AOL has been buying. It spent $300 million earlier this month to acquire Israeli chat software manufacturer Mirabilis, the publisher of ICQ.
AOL needs the expertise of small companies like Mirabilis to add new services to its online service and Internet portal. Other Internet companies like Yahoo and Excite also have been jockeying to buy key content creators and technology providers to beef up their sites.
AOL kept mum about its plans. The company said it will offset dilution by investing the proceeds in interest-bearing investments. A company spokesman said only that the offering’s proceeds would be used to "strengthen AOL’s balance sheet and enhance its financial flexibility."
