The hottest listing for HomeAway this week isn’t a luxury rental in Key West, but a permanent spot on the Nasdaq.
The Austin, Texas-based vacation rental website, which plans to trade under the symbol AWAY, is expected to go public Wednesday in the latest tech IPO. After registering for its offering in March, the company said earlier this month that it is offering about 8 million shares at a price between $24 and $27 per share, valuing the company at about $2.2 billion.
Late Tuesday night, HomeAway announced that shares will start trading at $27 Wednesday.
HomeAway isn’t a brand-name social media company in the vein of LinkedIn and Pandora, which debuted earlier this year, but it’s still on the radar of industry watchers looking to gauge the market’s interest.
With the expected IPOs of Facebook, Zynga, and Groupon on the horizon, market observers are on the lookout for signs of another tech bubble.
Lise Buyer, a founder and principal of Class V Group, an IPO advisory and management firm, said that there are two kinds of IPO investors: speculators interested in short-term returns and those interested in the fundamentals of the business. HomeAway, she said, would likely attract both.
“With any luck, HomeAway will receive a warm, but not crazy reception, letting most of us know that the markets are once again valuing fundamentals and compelling growth stories as opposed to just throwing money at the newest, hottest consumer brand name to go public,” she said.
While LinkedIn enjoyed an off-the-charts public debut and Pandora experienced a more modest single-day pop, Nitsan Hargil, director of research for GreenCrest Capital, expects HomeAway to fall somewhere in the middle.
“There will still be excitement around it, quite a bit,” he said. “But I don’t think you’ll see any frenzy.”
The company is growing at a strong pace, he said, but it's also stretching its sales and marketing expenses to “stratospheric levels.” While its revenues nearly doubled from 2008 to 2010, he said, sales and marketing costs went up by nearly 200 percent. But Hargil said that if HomeAway continues to grow at the current rate, it could reach profitability as early as later this year.
As for the success of its IPO, he said it depends on demand and price.
“Demand is a function of price,” he said. “I think [it's] unlike Pandora a couple of weeks ago, which was priced a little bit aggressive and subsequently paid the price. It did pop on the open, but then within three days was lower than the offer price. . . . I don’t think you’ll be seeing that again.”
Especially considering the bankers underwriting the offering (Morgan Stanley, Goldman Sachs, Deutsche Bank, and J.P. Morgan), he said significant consideration was likely given to the opening price. Not only does HomeAway want to be remembered for a strong IPO, but the bankers also want a string of successful IPOs to pave the way for even bigger ones down the line.
“Everybody would be happy if this thing, a week down the road, is trading about 25 or 30 percent above the IPO [price]. That would make everyone feel good about it,” he said.