Potential IPO pricing
According to its SEC filing, Trivago plans to offer ~28.5 million shares at a price of $13–$15 per American depositary share (or ADS). At the midrange of that band ($14 per share), it expects to raise $399 million. At the top end of that band ($15 per share), it expects to raise $428 million. This pricing also values the company at ~$5 billion.
J.P. Morgan, Goldman Sachs, and Morgan Stanley will be the lead underwriters. Citi, Bank of America, Deutsche Bank, Cowen and Co., Allen & Co. LLC, and Guggenheim Securities will be the co-bookrunners.
Use of IPO proceeds
Trivago would not get any proceeds from the selling shareholders. After underwriter commissions and expenses, the net proceeds to Trivago could be ~$235.4 million.
According to the filing, the proceeds of the IPO will be used “for general corporate purposes, including to fund investments in technology, for working capital to fund our growth strategies described elsewhere in this prospectus and to pursue strategic acquisitions.”
Trivago’s growth strategy has been to make huge ad spends all over the world. Many analysts believe that Trivago could use most of the IPO proceeds for this purpose.
Expedia (EXPE) bought a 63.5% controlling stake in Trivago in 2013 for ~$632 million. After the IPO, it would still hold this stake through Class B shares. Although the value of Class B shares is not known yet, at the current pricing of Class A shares, Expedia’s stake in Trivago can be valued at more than $3 billion. That is a huge return on investment for Expedia.
You can gain exposure to Expedia through the First Trust Dow Jones Internet ETF (FDN), which has 3.0% of its holdings in the company. FDN also has a 1.7% holding in rival TripAdvisor (TRIP). However, it doesn’t have any stake in archrival Priceline (PCLN), which has a stake in Ctrip.com (CTRP), China’s leading online travel agency player.