Kayak has had a long and complicated history that began with its founding in 2004 by alums of Expedia, Travelocity, and Orbitz. Back in November 2010 the firm filed its S-1 form with the SEC indicating its intent to take the company public, usually a moment of defining success. But Kayak then pulled back from the brink as unfavorable conditions for an IPO prevailed. That unkind environment has lingered until today, when the company set a price range for its stock at $22-$25 a share, meaning it’ll raise up to $100 million in ready cash.
Kayak is one of the most notable names to attempt an IPO in the aftermath of Facebook‘s float–an event that was hyped as perhaps the IPO of the decade. What happened next is all too familiar now: an astronomically high price set before launch, controversial secret meetings with institutional investors, last-minute downgrading of Facebook’s future financial predictions, and a confusingly long and persistent slump in Facebook’s share price, which has yet to recover to its launch value.
Kayak is attempting to raise a tiny fraction of Facebook’s off-the-charts offer, offering four million shares of Class A stock. So what can Kayak’s brain trust take away from Facebook’s IPOops?
1. Tell a future-focused story
A lot of Facebook’s issues arose because at the eleventh hour it began to worry that its user adoption rate was slipping and that near-future finances as portrayed in its pre-IPO financial package may have been overly optimistic. That’s never a good story to tell investors, and Facebook was already a little in trouble on this front because its future path wasn’t necessarily well-defined.
Kayak operates in a tricky market segment, with giant players like Google constantly threatening its business–seemingly on a whim. But Kayak’s story is pretty confident–coincidental with its IPO pricing it’s released data showing revenue growth from $52.7 million in Q1 2011 to $73.3 million for 2012. That represents a 39% growth, year on year, and is exactly the kind of figure investors like to hear.
Between now and IPO, while following the relevant restrictions on its financial activities, Kayak has to keep this positivity going–enough to convince investors that it has a definite path to even greater growth, perhaps through acquisitions. Its S-1 is vague on the matter, noting that while at least a portion of the fund it raises from IPO will be used to “expand [its] current business through acquisitions or investments in other strategic businesses, products or technologies” it doesn’t have any “current specific plans.” Making more confident statements about its business model in updated S-1s may seem like a good idea.
2. Don’t believe the hype
A great deal of the controversy with Facebook’s IPO was the extent to which it was hyped up–generating too much interest and over-exuberance from all sides. Kayak’s IPO is far less significant a deal, but the advice still stands–it shouldn’t play for hype. The slightly matter of fact tone of its S-1, noted above, is perhaps an indicator that this isn’t going to be a problem, but if the market or media gets too excited about Kayak’s offering, possibly even because it’s coming so soon after Facebook’s, the company may be advised to maneuver to deflate the hype.
3. Work with Nasdaq
Facebook is listed on Nasdaq, and the exchange had taken measures to prepare before the hotly anticipated IPO to ensure that everything went smoothly. Unfortunately the exact opposite happened when Nasdaq’s trading systems completely failed to track the volume of shares trading hands, leading to a 30-minute delay to trading starting, and periods when investors couldn’t move on their stock. According to the Wall Street Journal, traders claim some $500 million in revenues were lost as a result, and Nasdaq’s CEO Robert Greifeld has publicly admitted that arrogance and overconfidence among his staff were responsible.
Kayak’s IPO won’t see anything like the same sort of trading as Facebook’s, but it is going to be very closely scrutinized. Investors will be looking for any sort of indication that the system isn’t working, which could hurt both Kayak’s image and confidence in the stock market itself. It’s safe to assume that high-level meetings will happen before the IPO to ensure that everything runs smoothly from the moment the bell is rung on IPO day.