Up down up down up down
Here is a success story to build on. It took Kayak Software (ticker symbol: KYAK) twenty months to go public (IPO) and less than four months to get acquired. In my opinion, it sure sounds like team Kayak new what they were doing and executed the perfect business plan.
The company IPO’d on July 20th and placed 3.5 million shares at $26.00 per share. The price soared to $35 (a 34.62% increase) before closing the session at $33.18. Unlike most of the IPO’s that hit the markets in 2012, Kayak has the distinction of never trading below the initial $26 price. When analyzing the chart of Kayak, it has been a wild ride to say the least. During the short trading life of the software company, share pricing has gone from $26 to $35.35 to $26.02 to $31.22 to $26.51 to $37 to $28.38 (10/22). It has been a fantastic stock to trade with an upward bias (based on support and higher lows).
Under the terms of the agreement, Priceline negotiated $1.3 billion in stock and $500 million in cash for. This deal is rather unique considering that the majority of the mergers and acquisitions (M & As) completed this year were all cash deals. Considering some of the enormous price swings Priceline (ticker symbol: PCLN) has experienced lately, I am actually surprised Kayak approved this deal. On August 8th, PCLN imploded by $120 on its earnings release.
Although the $40 price tag for Kayak appears to look decent on the outside, the question is; did the company get lowballed? Kayak is being valued at 5.8 times trailing revenue and around 5.6 times its 2012 revenue. Priceline, as it turns out, is trading at about 5.5 times trailing revenue or 5.3 times its 2012 revenue. In my opinion, despite Kayak’s faster growth, the company’s valuation is just slightly above Priceline’s; suggesting that the acquisition of Kayak has little to no buyer’s premium.
It’s quite possible Kayak could have held out for $45 or higher. Congratulations and kudos top team Kayak.
As an aside, how do you think Travelzoo (ticker symbol: TZOO) is handling this? They placed themselves on the auction block long before Kayak IPO’d. This has to hurt. Feel free to drop me an e-mail or leave a comment.