Message Font: Serif | Sans-Serif
No. of Recommendations: 0
Monday, July 7, 1997

DJIA: 7858.49 -37.32 (-0.47%)
S&P 500: 912.20 -4.72 (-0.51%)
Nasdaq: 1470.74 +3.13 (+0.21%)
30-Year Bond 100 19/32 +18/32 6.57% Yield
COMPUSERVE (Nasdaq: CSRV) (N) (S) gained $1 5/16 to $12 1/16 as The Wall Street Journal reported that AMERICA ONLINE (NYSE: AOL) (N) (S) bid "roughly $1 billion" for the company last week. If AOL does want to get its hands on CompuServe's subscriber base, the price per subscriber at the whispered price would be about $330 (not including members of licensee NiftyServe), substantially less than the current per-subscriber value on AOL of over $800. Backing out intangible assets from CompuServe's latest balance sheet, such an acquisition would be priced at 1.32 times assets and 1.64 times tangible book value. AOL is trading at more than 10 times tangible assets and more than 100 times tangible book value. If AOL can generate a 5% return on tangible equity with those subscribers, then it will have paid about 33 times earnings. If it can generate that return on its own tangible book value, investors are paying 200 times earnings for AOL.

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.