December 16, 2016 / 12:21 AM / 7 months ago

Trivago's IPO pricing falls below expectation

3 Min Read

(Reuters) - Trivago GmbH (TRVG.O), the hotel search platform that is majority owned by U.S. online travel firm Expedia Inc (EXPE.O), priced its initial public offering (IPO) on Thursday far below expectations.

The offer priced 26.1 million American depository shares (ADS), down from a planned 28.5 million, at $11 per ADS.

Reuters had earlier reported that the company is expected to price its IPO at $11 per ADS, well below the indicated range of $13 to $15.

The company will raise $287 million from the offering.

The underwhelming pricing of the Düsseldorf, Germany-based company's offering reflects some concerns among investors, in a challenging year for technology IPOs, that it may be too reliant on a few online travel companies for its revenue.

The downsized IPO comes on the tail-end of a difficult year for IPOs. Amid investor jitters and poor post-IPO performances, the total amount raised by IPOs is down 42 percent so far this year, according to Thomson Reuters data. Proceeds raised by internet software and service companies such as Trivago are $450 million, down 41 percent from $762 million this time last year.

Hotel booking platforms such as Trivago allow customers to search through hotel deals aggregated across a variety of online travel sites. It makes much of its money from online travel agencies, which pay for each click a customer makes on their hotel offers.

Majority shareholder Expedia is one of its biggest customers, which along with brand affiliates such as Travelocity and Hotwire comprised 35 percent of its total revenue this year through the end of September. Priceline Group Inc (PCLN.O) and its affiliated brands such a Booking.com, contributed 43 percent of the company's revenue through the same time period.

Global travel spend grew to an estimated $1.1 trillion in 2015, excluding Canada, Latin America and Eastern Europe, a compound annual growth rate of 4.7 percent since 2010, according to Phocuswright Data cited in Trivago's prospectus.

Still, the industry has been challenged by the increasing number of hotels that encourage booking directly through their own websites.

Trivago rival Tripadvisor Inc (TRIP.O) has seen its stock tumble in recent months, as its growth has slowed and it has sought to shift to a model that allows customers to book directly.

Expedia paid 477 million euros ($531 million) in 2012 for a 62 percent stake in Trivago.

Trivago will list on Friday on the Nasdaq under the ticker symbol "TRVG."

JPMorgan Securities LLC, Goldman Sachs & Co and Morgan Stanley & Co LLC are among the underwriters.

Reporting by Lauren Hirsch; additional reporting by Parikshit Mishra in Bengaluru; Editing by Sandra Maler, Lisa Shumaker and Sunil Nair

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