AOL sinks after S&P negative stance: Media titan's 'BBB+' credit rating remains intact

NEW YORK (CBS.MW) - AOL Time Warner shares fell 5 percent in the after-hours market Friday after Standard & Poor's said that it has revised its outlook for the company from "stable" to "negative."

The ratings service didn't, however, change the media giant's credit rating of "BBB+."

A spokesman for S&P said that "deteriorating ad sales" could result in "weaker credit measures" and that the Securities and Exchange Commission inquiry could consume management's attention "as it strives to stabilize operating performance."

On Thursday, concerns over the SEC's investigation into the media giant's accounting practices pushed shares as low as $8.70.

In the regular session, AOL (AOL: news, chart, profile), which has dropped more than 70 percent in the past 12 months, jumped 13 percent, or $1.26, to $10.90. In late action, shares were last trading at $10.45.

Earlier, the stock rose in part because investors regard it to be a handsome value at these depressed levels.

AOL received a sorely needed, high profile boost when it was featured on Friday in the Wall Street Journal's widely followed column "Heard on the Street."

The Journal speculated that an investment in AOL now is "too good to pass up." It pointed out that AOL's stock doubled from lows experienced in 1997 and shareholders took home a massive return two years later.

Over the long-term, AOL's shares had plunged because of the prevailing notion on Wall Street that the company's America Online unit couldn't sustain its recent explosive growth amid the coming broadband revolution. Plus, many of its businesses were severely weakened by the prolonged advertising slowdown.

Then, earlier this week, AOL Chief Executive Officer Richard Parsons disclosed during a conference call with investors that AOL is under investigation by the Securities and Exchange Commission for its accounting practices.

In other news:

Cohen, Milstein, Hausfeld & Toll, P.L.L.C. Files Class Action Suit in Alexandria, Virginia Against AOL Time Warner

7/26/2002 6:03:00 PM

WASHINGTON, Jul 26, 2002 (BUSINESS WIRE) -- The following notice is issued by the law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C., who filed a class action in the United States District Court for the Eastern District of Virginia, Alexandria Division, on behalf of purchasers of AOL Time Warner ("AOL") (AOL) during the period between October 18, 2000 and July 17, 2002, inclusive.

This case has been filed in Virginia where America Online is based.

The Complaint alleges that during the Class Period, AOL recognized revenue on a variety of transactions in violation of generally accepted accounting principles in an effort to hide the decline in advertising revenues. When the true facts concerning AOL's recognition of revenue in violation of GAAP were revealed in a Washington Post article on July 18, 2002, AOL shares declined an additional 10% to close on July 18, 2002 at $12.45. At the beginning of the class period, AOL common stock traded at approximately $47 per share The plaintiff's counsel -- Cohen, Milstein, Hausfeld & Toll, P.L.L.C. -- has significant experience in prosecuting investor class actions and actions involving financial fraud. The firm has offices in Washington, D.C., Seattle, Washington, and New York and is active in major litigation pending in federal and state courts throughout the nation. You may visit the firm's website at www.cmht.com.

The firm's reputation for excellence has been recognized on repeated occasions by courts which have appointed the firm to lead positions in complex multi-district or consolidated litigation. Cohen, Milstein, Hausfeld & Toll, P.L.L.C. has taken a lead role in numerous important cases on behalf of defrauded investors, and has been responsible for a number of outstanding recoveries which, in the aggregate, total hundreds of millions of dollars or more. If you purchased common stock of AOL during the Class Period, you may move the Court no later than September 16, 2002 to serve as lead plaintiff for the Class. In order to serve as lead plaintiff, you must meet certain legal standards.

If you have any questions about this notice or the action, or with regard to your rights, please contact either of the following: Daniel S. Sommers, Esq. or Lisa Polk, Cohen, Milstein, Hausfeld & Toll, P.L.L.C., 1100 New York Avenue, N.W. Suite 500 - West Tower Washington, D.C. 20005, Telephone: 888/240-0775 or 202/408-4600, E-mail address: dsommers@cmht.com or lpolk@cmht.com.

(Note: this story was previously posted in a pulled thread.)

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