Remembering the Round-trip Deals of the Past – Google and AOL here we go again
Remember the Round-tripping deals of the Dot.com bubble days? Employees from AOL, and many other New Economy companies, from dot-coms to energy traders, from fiber-optic networkers to computer hardware manufacturers were all fed to the wolves for these types of deal structures. Remember?
Spurred in part by a Washington Post investigation into “unconventional deals” at the pre-merger AOL, the Securities and Exchange Commission is rummaging through the attic of the hobbling post-merger AOL. At the center of the investigation, according to the Wall Street Journal, are so-called round-trip transactions, which the Journal defined as a company selling “an unused asset to another company while at the same time agreeing to buy back the same or similar assets at about the same price.”
Flash forward to the present – Google invests $1B for a 5% stake in AOL, which in essence gives AOL the cash to pay Google’s rev share. So isn’t Google taking cash from the balance sheet, sending it over to AOL to seal the the AOL distribution deal, and then taking the cash back and recognizing it as revenue? And this time it’s the Time Warner guys, the same guys who crucified AOL for this very practice just a couple of years ago, cutting the Round-tripper?
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