Kayak Looks Cheap As It Prices Its Much Delayed IPO At $26

by Trefis Team
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Kayak, a leading travel search company, at last finalized the price for its much delayed Initial Public Offering (IPO) at $26 yesterday and will start trading on NASDAQ under the “KYAK” ticker today onwards. Having filed its initial registration document more than 20 months back, the company had stalled its IPO on account of many factors – increasingly volatile market conditions, Google’s (NASDAQ:GOOG) acquisition of ITA Software in April 2011 and the Facebook (NASDAQ:FB) IPO debacle.

We value Kayak at $1.2 billion, which translates into a Trefis price estimate of $31.05 based on the number of outstanding shares post the offering. Our valuation is based on a discounted cash flow analysis of Kayak’s core businesses – advertising and referral fees from hotels, airline tickets and car & cruise referrals.

See Our Complete analysis for Kayak’s stock here

The company will offer 3.5 million shares of class A common stock at a price of $26 per stock.  All shares issued prior to the IPO will be converted to class B shares which will have a 98.6% voting control after the offering. Along with the public offering, the company may issue additional shares in private placement to existing stockholders.

Posting a solid Q1 2012 results with a y-o-y increase of 39%, the company feels confident about the timing of the IPO and expects to raise up to $100 million, almost double from its initial target of $50 million. With over 40% increase in both the number of queries processed as well as total mobile downloads in the March’12 quarter, the company feels confident of continuing the momentum in growth.

Though, the company continues to be at a potential disadvantage with Google’s acquisition of ITA Software, we believe that it will continue to benefit from the advancement in global online travel sector as a whole. (Read Related Articles: Key Drivers Behind Kayak’s $850 Million Valuation & Kayak Is Worth $850 Million As It Hedges Its Dependence On Google ITA)

Note: We have recently updated our model and extended our forecast period till 2019, which explains the difference in valuation from the above mentioned articles.

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