IPO Investors' Cold Shoulder to Orbitz (OWW, BX, TZOO)

Investors are waiting for the pricing of Orbitz (NYSE:OWW) tonight in its IPO, which no one is foolish enough to not know this is a re-IPO.  The official terms were for 34 million shares in a $16.00 to $18.00 range from lead managers Morgan Stanley, Goldman Sachs, Lehman, and JP Morgan.

This isn’t the first time Orbitz has been public.  If you will recall it was public before under the "ORBZ" NASDAQ ticker, and then it was acquired for some $1.25 Billion in 2004 by Cendant when it was still in its mish-mash conglomerate stage and rolled up into the Travelport unit with Galileo (which Cendant bought in 2001 for $2.9 Billion or so).  Cendant then sold the whole Galileo unit to Blackstone (NYSE:BX) for a sum of $4.3 Billion.

This deal is important for more than one reason.  It is Blackstone’s (NYSE:BX) first real IPO of a company that it is acquired since it came public itself.  Blackstone is trading at a post-IPO low today, and investors who buy shares of Orbitz know they are just giving money to Blackstone in a rewarding move in a regurgitated company.  That is limiting the interest.

The other issue that is hurting Orbitz is that Travelzoo Inc. (NASDAQ:TZOO) has been trading like a pig.  It was already well off its highs, but then has drifted lower since it issued an earnings warning because of its expenses in expanding internationally to France, Hong Kong, and Japan.  Maybe they think everyone is following Nixon to China and cheering "Vive la Godzilla!"

So far, it has been a chore trying to find eager beavers looking at Orbitz.  There is still quite a bit of value to Orbitz as an online travel portal.  It is just price sensitive and the fact that investors know they will get to buy more shares from Blackstone down the road is keeping IPO investor demand limited.

Jon C. Ogg
July 19, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.