TripAdvisor's fate is not entirely in its own control. But recent speculation about the company's ownership seems to have been overheated.
Since TripAdvisor’s initial public offering, controlling interest has been held by Liberty Interactive. Last August, the shares with controlling interest were spun off into a company called Liberty TripAdvisor Holdings.
It holds 57% voting interest in TripAdvisor, though it only has a 22% stake in TripAdvisor's shares.
In an analyst's report, Oppenheimer wrote that it sees the spinoff as the
"precursor to a potential takeout scenario or an eventual combination that enables TRIP to consolidate the voting control in a cash/stock deal."
Earlier this month, Bloomberg Business pointed out that a half-year waiting period is typically required to enjoy a tax-free exit on any merger or sale. As of this month, that waiting period has passed.
Bloomberg Business speculated that the shares might be offered to another party besides TripAdvisor, such as Priceline Group.
But that outcome doesn't seem likely, at least according to remarks made today by the chief executive of the holding company, Greg Maffei, who, importantly, has also been chairman of TripAdvisor itself for a few years.
Maffei spoke at the Morgan Stanley Technology, Media & Telecom Conference. He was asked about why the spinoff took place, and what will happen next.
"Well, looking at why we did the spin, our basis in TripAdvisor is very low. Our gain in the value of the TripAdvisor shares that Liberty TripAdvisor holds is quite high.
So, somewhere down the road, the opportunity to sell Liberty TripAdvisor as a company or merge it into TripAdvisor would likely obviate a large corporate capital gain.
That having been said, I don't think there's any need to collapse that in the near term. In fact, there's probably some tension around collapsing it anytime soon.
How much are the B-shares worth? What kind of premium would we get?
Often, those kinds of discussions are easier in the context of some transaction down the road, if it ever were the case, where TripAdvisor would monetize rather than just a disagreement about how much Liberty TripAdvisor gets versus what the other TripAdvisor shareholders get.
First and foremost, we're bullish on TripAdvisor. We have continued top-line growth of shoppers and visitors as it moves from being more of a vertical search site to more of a transaction site.
There's opportunities for us to monetize a higher percentage of the hotel transactions. To monetize the traffic we get for restaurants and attractions.
We had the LaFourchette acquisition in the restaurant space. We had Viator in the attractions space. Other acquisitions potentially in the attractions space. All of those will give us a broader funnel of revenue and a deeper funnel. That's attractive."
That said, no one knows whether Liberty TripAdvisor Holdings will sell the controlling interest to either TripAdvisor or to another bidder. The market currently values the holding company at $2.46 billion.
Manish Hemrajani, executive director of Oppenheimer, the investment bank, says his best guess is that he doesn't expect a resolution until next year at the earliest. In an interview, Hemrajani said:
"I don’t see Maffei selling this to anyone else until TripAdvisor gets the first option to buy that stake."
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