Instant Analysis: Expedia's Trivago Files for IPO

By Markets Fool.com

What happened?

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Confirming rumors that had been swirling for several months, accommodation booking and search company Trivago, currently majority-owned by online travel agency giant Expedia (NASDAQ: EXPE), has filed for an initial public offering.

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In the filing, Trivago revealed that it aims to raise up to $400 million in the issue. In conjunction with a number of its shareholders -- but not Expedia -- it will do so by floating American depositary shares, a common form of stock issued by foreign companies that trade on U.S. exchanges.

Although Expedia is a U.S.-headquartered company, Trivago is based in Dusseldorf, Germany.

In the wake of the stock market flotation, there will be two classes of shares. Class A shares will be the ones issued in the IPO; class B shares will be held by Expedia.

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No firm date has yet been set for the issue, and Trivago did not specify the number of American depositary shares it plans to sell. The company will list on the Nasdaq under the ticker symbol TRVG. The IPO's underwriters are JPMorgan Chase unit JPMorgan Securities, Goldman Sachs, and Morgan Stanley.

Does it matter?

At this early stage, it's hard to determine just how much of an impact the Trivago IPO will have on Expedia's stake. We still don't know how many shares will be offered, plus initial deal sizes have a way of changing as an IPO gets closer to realization.

Regardless, Trivago's market debut is sure to be beneficial for Expedia. After all, the online travel incumbent acquired 62% of the fast-growing site in 2012 for around $531 million. This looks like a good deal these days considering that a minority stake is initially being valued at up to $400 million.

A boost in the value of the Trivago stake would, theoretically, increase the attractiveness of Expedia. The latter's stock has traded up only slightly this year, in contrast to the nearly 20% rise enjoyed by archrival Priceline Group (NASDAQ: PCLN).

The latest developments for Priceline Group have been encouraging; it posted a third quarter that saw revenue rise by 19% on a year-over-year basis and adjusted net profit grow by 20%.

In Expedia's most recently reported quarter, it beat Priceline Group on a revenue growth basis, with top line improving by 33%. Net profit, however, declined slightly due to an increase in expenses.

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