AOL Stock Falls on Word of SEC Probe

Shares of AOL Time Warner Inc. dived 15% into the single digits Thursday on a flock of downgrades by Wall Street analysts after word of an SEC investigation into accounting practices at the America Online unit.

Not only does the Securities and Exchange Commission probe create new uncertainty, but several analysts said they have no confidence that leaderless America Online can effectively deal with sputtering subscriber growth and fast-shrinking advertising revenue.

Thursday’s plunge wiped out $8 billion in market value. The shares fell $1.76 to a four-year low of $9.64 on the New York Stock Exchange, with 149 million shares traded--six times the usual daily volume. The stock is down 70% this year and 80% since the merger of AOL and Time Warner in 2001.

Jefferies & Co. analyst Frederick W. Moran, in a note to investors, said strength in film, cable TV and publishing won’t be enough to offset America Online’s problems in the near term.

AOL Time Warner Chief Executive Richard D. Parsons, in disclosing the SEC “fact-finding inquiry” Wednesday, said the accounting practices in question were reviewed and approved by the company’s auditors, Ernst & Young.

He said his top immediate priority is finding a new head for the Internet unit to replace Robert W. Pittman, who resigned last week.