Does Internet Brands stock delay mean trouble for travel?
Internet Brands made a few headlines in the travel industry when it bought the online forum FlyerTalk in March. It wasn’t the company’s first travel acquisition. It already owned several other sites, including WikiTravel and CruiseMates. If you’re an investor, you may have also noticed that Internet Brands filed a Form S-1 registration statement with the Security and Exchange Commission this summer to go public.
But that’s not all. You probably also saw two delays (Form S1-As). And you probably also read some of the things that were being written about the stock issue.
I don’t know if Internet Brands is star or a dog, nor do I care if it raises the $100 million it hopes to from Wall Street. My interests are your interests: Does this delay say something about the future of travel?
The Internet Brands registration statement, like other so-called “Red Herrings” filed by soon-to-be-public companies, is loaded with boilerplate statements — forms, statements, disclosures. Doesn’t exactly make for interesting reading.
It’s still worth a glance.
What’s with the hold-up? The company won’t talk — it’s not allowed to. It’s in the middle of what the SEC calls a “quiet period” and may not say anything beyond the registration statement that could affect its stock price.
But go to page 48 for a clue:
Since the fourth quarter of 2006, the downward cycles in both the automotive and home mortgage industries have negatively impacted our revenues. Total revenues declined $2.8 million, or 12.7%, for the three-month period ended March 31, 2007 compared to the three months ended March 31, 2006.
I’ve seen registration statements with far worse financials. I suspect the mortgage meltdown is spooking investors. IB also owns sites such as Loan.com and Doityourself.com. Bad time to be in that business. Very bad time.
So is the company “down” on travel? Maybe. Page 43 suggests the travel category isn’t pulling its weight — yet.
Historically, a substantial majority of [advertising] revenues has been derived from the automotive category. As our website audiences continue to grow and diversify among consumer categories, we expect that our sources of advertising revenues also will continue to grow and diversify.
Which brings us to the “risks” section:
Declines or disruptions in the travel industry or general economic downturns could reduce revenues.
The health of the travel industry affects our travel websites. Travel expenditures are sensitive to business and personal discretionary spending and decline with downturns in the economy. The travel industry experienced an extended downturn beginning in 2001, and there is a risk that a future downturn, or extended weak demand for travel, could adversely affect the growth of our travel websites.
Events or weaknesses in the travel industry that could negatively affect our business include price escalation in the airline industry or other travel-related industries, airline or other travel-related strikes, airline bankruptcies or liquidations, fuel price increases, catastrophic natural events or bad weather, and foreign-currency fluctuations that increase travel costs relative to the traveler’s home currency.
Additionally, travel expenditures are sensitive to safety concerns, and thus may decline after incidents of terrorism, during periods of geopolitical conflict in which travelers become concerned about safety issues, or when travel may involve health-related risks. These effects, depending on their scope and duration, which we cannot predict with any certainty, could significantly impact our long-term operating results or financial condition.
Whoa.
Does this mean the company believe travel is going to tank? No. On the contrary, I think it suggests travel represents its future.
According to the S-1, the travel category saved the day during the most recent earnings period, accounting for a $479,000 increase advertising revenues over three quarters. I think Internet Brands sees a lot of potential in travel in general and online travel in particular.
Now, if they can only get that stock priced …
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