Skift Take

A dream deferred no longer -- maybe. Kayak can almost taste the public markets now, but as its IPO roadshow kicks into gear, this is not yet a done deal.

Source: Skift
Author: Dennis Schaal

As the Kayak IPO roadshow visits New York City today, it’s ironic that some analysts are asking, “Why now?”

And, is the initial price range floated of $22 to $25 per share a bit expensive?

The roadshow schedule isn’t public information, but it is known that the Kayakers will be visiting Manhattan today and a California stop in the land of the venture capitalists is on tap for July 17.

One question on everyone’s mind is why did Kayak, which filed its IPO prospectus in November 2010 and found itself subject to all kinds of roadblocks, now hurry out of the gate so soon after underwriter Morgan Stanley’s Facebook debacle.

The lone IPO to come to fruition in the interim has been ServiceNow, which sees its stock up about 3.6% since its public debut in June, while Palo Alto Networks is another trailblazer of sorts, having hit the streets this week with a stock price range, as has Kayak.

Timing decisions for IPOs obviously are complex ones, but one factor in Kayak’s choice of this week has to be Morgan Stanley’s desire to right its own ship.

Another is that if Kayak can actually raise its $100 million and become a public company sometime late in the week of July 16, as it hopes, it would be advantageous because its first earnings report would be for the third quarter, an historically peak season in travel.

As Kayak notes in its financial filings: “Typically, our highest revenue quarters are the second and third quarters due to the fact that high travel seasons fall in these quarters.”

Meanwhile, some analysts are wondering whether the Kayak IPO, specifically the proposed price range for the stock, is expensive.

Bankers are apparently talking about the Kayak share price range being a multiple of about 9 times or 10 times projected 2013 EBITDA, while Expedia currently trades at around a multiple of 6.5.

So investors might wonder if it would be more beneficial to invest in Expedia instead. It, too, has a growth story to sell.

However, the counter-argument is that Expedia is an online travel agency with a different business model than Kayak’s so TripAdvisor might be a more appropriate comp because the business models are similar.

And, TripAdvisor’s EBITDA multiple is around 15, making Kayak seem like a relative bargain.

Still, there likely will be tough questions for Kayak on its roadshow today and in the coming days.

Does the metasearch model deserve respect?

At the 2009 TravelCom conference in Atlanta, Kayak co-founder and CEO Steve Hafner quipped that metasearch is a low-margin business, although he now boasts about Kayak’s profitability.

Meanwhile, in the roadshow video Hafner says the company has felt no material impact from the introduction of Google Hotel Finder and more recently Google Flight Search.

And, while most of the travel industry buzz and worries in financial circles have revolved around ITA Software-powered Google Flight Search, it has taken off sluggishly, which can’t hurt Kayak’s prospects.

But, Google Hotel Finder may turn out to be a sleeper and more of a concern for Kayak — especially since hotels offer better margins than airline tickets.

Hafner was attuned to this hotel threat in 2009, way before Google introduced Hotel Finder.

So will Kayak actually become a public company next week; provide an exit for General Catalyst Partners, Sequoia Capital, Accel Partners and Oak Investment Partners; and get the bankroll to keep innovating and expand internationally?

In its favor, one analyst says: “A deal can get done if Morgan Stanley manages the supply and demand. And, raising $100 million is not a massive number.”

At this stage, however, it is far from a done deal.


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Tags: ipo, kayak, tripadvisor

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