NEW YORK (CNNfn) - Microsoft Corp.'s online travel portal Expedia Inc. saw its initial public offering soar Wednesday as it opened at more than twice the IPO price and soon was trading at close to quadruple that value.
The offering of 5.2 million shares was priced at $14, above from its expected range of $10 to $12. It opened at 37 on the Nasdaq under the symbol EXPE. It peaked at 63 before sliding to 53-7/16, still rising 282 percent on the day. That makes it the fifteenth best first-day percentage gainer in history, just behind the 283 percent gain for eToys Inc. May 19.
The success of the IPO comes despite projected continued losses for the Redmond, Wash., site and a rush of recent bad news since its September IPO filing, including airline commission cuts, mergers of competitors and new competition from four of the nation's five largest air carriers.
The $72.8 million raised by the offering will be used for working capital and general corporate purposes, according to the prospectus.
The company lost $5 million in the quarter ended Sept. 30 on revenue of $15.3 million, compared to a loss of $5.2 million on revenue of $6.1 million a year ago. It is one of the more established online travel sites, in operation since October 1996.
Even after the offering, Microsoft Corp. (MSFT) will maintain an 84-to-86 percent stake in the company, depending on disposition of oversubscription shares to its underwriters.
Bad news leads up to offering
Unlike many Internet portals, Expedia has a source of revenue beyond advertising. It gets much of its revenue from commissions on tickets and travel packages sold to customers. But airlines, led by industry leader United Airlines, started cutting commission for all travel agents to 5 percent of ticket prices from 8 percent.
United, the main division of UAL Corp. (UAL), announced Tuesday it is joining with three other leading carriers, Delta Air Lines (DAL), Northwest Airlines (NWAC) and Continental Airlines (CAL), to form a joint venture to operate a still-unnamed travel portal starting next year.
Expedia is the leading Web travel site in terms of traffic, according to Media Metrix, but two of the leading online competitors, Travelocity.com and Preview Travel (PTVL), announced plans Oct. 4 to merge, which could create a larger service. Travelocity's parent, Sabre Holdings Corp. (TSG), will own 70 percent of the combined company with Preview Travel's current shareholders owning the remainder. Sabre is the electronic airline reservation service 83 percent owned by American Airlines parent AMR Corp. (AMR).
The news of new and merged competitors and cuts in commissions does not change the long-term prospects for Expedia, said Suzie Levine, product manager for the company.
"In terms of supplier sites, we've always had symbiotic relationship where they are both a supplier and competitor," she said about the new airline joint venture. As to the cut in airline commissions, she said, "We already cited commissions as a risk factor" in the prospectus.