Savings Experiment: Snow Removal
The Money Man Behind Rick Santorum: Who Is Foster S. Friess?Expedia Inc. (NASDAQ: EXPE), the online travel company, announced that it would buyback 116.7 million shares. That was in June. The company's shares quickly jumped from under $24 to $29.
Today, the company announced that the share purchase program would be reduced to 25 million shares. The stock will be bought in a price range of $27.50 to $30.00. On the announcement, Expedia's price promptly dropped to $26.50, about 9% down.
Bloomberg quotes Expedia Chairman Barry Diller as saying, "The terms available to us in the current debt market environment were simply unacceptable." The company would have added $3.5 billion in debt to cover buying back the stock.
What happened? Well, credit is getting tighter, but it is never too tight for really attractive deals. The company is not exactly minting money. In the last reported quarter, net income was $38 million on revenue of $551 million. Interest payments for the quarter were about $11 million. With the additional $3.5 billion of debt on the books, interest payments could have gone up as much as 7 times. And there would not be a good enough ratio of operating income to the sum of the old debt plus the new borrowing Expedia would have made to buy the 116.7 million shares.
The simple reason that there may not have been debt available at good interest rates is that earnings would not support it.
Douglas A. McIntyre is a partner at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
7-23-2007 @ 8:24PM
John said...
Well, EXPEDIA is doing bad in many ways. Its rank in ALEXA is falling too( http://www.alexa.com/data/details/traffic_details?url=expedia.com ). Maybe people (travelers) are realizing they cannot trust them. It won't take long for investors to realize they have to put their money in another place. Just search for "expedia complaints" in search engines and you will be surprised.
7-24-2007 @ 2:12AM
Michael Schneider said...
Expedia runs several travel sites and travel is still going good and there is also the possibility that oil will pull back which could help the stock. Nevertheless, online travel is less hot than it was as travelers are returning more to travel agents. Expedia has made deals with some airlines like Jet Blue recently.
Just posted synopsis of a very recent article about Expedia along with many Internet stock items is available free in the Internet Stock Update section (left side, green label) at http://www.Barrelomoney.com.