AOL And Yahoo Out Of The Running,'s Angry Shareholders Say They'll Make Their Own Bid

Angry dog

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Last week, a large group of shareholders – led by Outboard Investments – told us they think management is selling the company for a price to low, shipping it off to AFCV Holdings for $127 million.Now Outboard tells us it’s talking to a private investor and that it plans to make a competing bid to take private.

This Outboard source says it will join with its new partner will buy at $12 per share – up $1.50 from the offer management presented shareholders last week.

Caution: We don’t know who this new investor is. We are only reporting that Outboard says its going to make a bid.

Told about the effort, CEO Bob Rosenschein said, “the board of directors takes with extreme seriousness all of our fiduciary responsibilities.”

Meanwhile, we’ve begun to understand why management accepted a price its shareholders might think it is too low.

First of all, let’s be honest: inventory is junk ad inventory. One source close to the company even compared unfavorably to content farm Demand Media’s inventory.

Secondly, lots of Internet companies with big money to spend have already looked at possibly buying and decided not to. One source close to the company says acquirers who eventually said no include IAC, Yahoo, and Announce Media.

As recently as last weekend, some shareholders were holding out hope that AOL would come in with a bigger bid. They hoped AOL CEO Tim Armstrong would want to buy the company and install his old Google colleague Patrick Keane as boss. Keane worked with for a bit last year after selling Associated Content to Yahoo for $100 million.

Those hopes looked dashed when AOL announced that it would spend almost half its $750 million in cash buying Huffington Post for $315 million. Additionally, we’ve heard Keane isn’t very interested in the job anyway – not without getting some major equity upside.

Another reason management may have agreed to a price lower than shareholders have been hoping for is’s dependency on Google. One source said Answers is 90% dependent on Google for traffic, and that revenues took a big hit when Google recently adjusted its search algorithm to fight search spam.

The fact that has 80% of its employees on the other side of the ocean is also said to have scared some people off.

Finally, look at’s volatile stock price. The share’s price sank below $5.00 just last August. Think shareholders would’ve been happy about $10.50 then?

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