Trivago To IPO: What Can We Learn From TripAdvisor Spinoff?

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Trivago filed a
F1 registration statement
with the SEC on Monday, offering its shares in an IPO in the United States.

Trivago's Origin

The company also said it has applied for having its ADS listed on the NASDAQ Global Select Market under the symbol TRVG. Trivago is a hotel search platform, and it makes money from booking sites that pay the company for the clicks — thus, it has a cost-per-click business model.

Trivago, conceived by three Germans, was launched in 2005, with the three founders owning 40 percent of the shares of the company. In December 2012, Expedia Inc EXPE announced an agreement to buy a 61.6 percent stake in Trivago by paying $632 in cash and stock. The founders still retain their investment in the company.

In its second-quarter 2016 earnings release, Expedia said the founders of Trivago and the company have agreed to explore the feasibility of an IPO of Trivago shares. Trivago's standalone revenues in the second quarter rose a stunning 41 percent year-over-year.

Number Crunching

In the filing, Trivago said in the 12 months ended September 30, 2016, it tracked approximately 1.4 billion visits to its websites and apps, resulting in 487 million qualified referrals, and offered access to approximately 1.3 million hotels in over 190 countries.

The company's total revenues for the nine months ended September 30, 2016, were 585 million euros, up from 393.8 million euros last year. Return on advertising spend, a measure of the effectiveness of its advertising, was 116.1 percent for the nine months ended September 2016, up from 108.1 percent for the same period in 2015. This is a key metric, as the company spends over two-thirds of its revenues on advertising.

The company revealed in the F1 filing that it spent 499.2 million euros on advertising in the nine months ended September 2016, which is about 85.3 percent of its total revenues.

Expedia's Adept Monetizing Strategy

Expedia has in the past adopted the strategy of monetizing fast growing assets. In December 2011, the company spun off Tripadvisor Inc TRIP, a travel website providing reviews of travel-related content.

The TripAdvisor spin-off was a win-win scenario for the shareholders of Expedia as well as TripAdvisor. The unlocking of the pent-up value in TripAdvisor was evident from the sharp rise in market capitalization, which stood at around $3.80 billion before the spinoff and have since then risen to $25.14 billion on a combined basis over a four-year time frame.

Thus, the Trivago IPO could also be a win-win proposition for both parties concerned, although Expedia's operational results could take a hit from a loss of contribution from Trivago.

At Time Of Writing

  • Expedia was surging up 4.44 percent to $124.18.
  • Priceline Group Inc PCLN was gaining 0.37 percent to $1,495.
  • Tripadvisor was adding 2.30 percent to $49.92.
Posted In: NewsTravelIPOsMoversTrading IdeasGeneralReal EstateF-1TrivagoTRVG
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