Expedia
(NDAQ:EXPE) shares rose $3.65, or 14.31%, to $29.15 today after the
company announced that it will repurchase about 42% of its own shares.
The company will conduct the $3.5 billion offer via a modified Dutch
tender auction later this month. Shareholders will be eligible to
tender their shares at that time for between $27.50 and $30.00 a piece.
Expedia
still has a wrecked balance sheet, but with 42% less shares available
it will improve modestly. The trick is being able to successful tender
the shares; after all, the stock rose to nearly $30 per share in
today's trading. Few shareholders are likely to want to tender their
shares for the lower end of the range, making it hard for the company
to go through with all $3.5 billion in buyout cash. In fact, the same
problem faced Brinker last year.
So, what does this all mean for
shareholders? Well, trading at the upper end of the Dutch tender price
range with a PE of more than 25x forward earnings in a difficult
industry certainly should be reason enough to think twice about picking
up shares of Expedia. While their intentions may have been goodhearted,
we have yet to see how the execution will play out.
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