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Kayak rises in Wall Street debut

Consumer Internet firm beats the curse

By Michael B. Farrell
Globe Staff / July 21, 2012
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The Facebook curse may be over.

Shares in online travel company Kayak Software Corp. rose 28 percent to close at $33.18 on Friday, the company’s first day of trading in the only initial public offering for a consumer Internet company since Facebook Inc.’s disappointing market debut in May.

Kayak sold 3.5 million shares at $26 — above its expected price range — raising $91 million almost two years after the company first filed paperwork to go public. The company is trading on the Nasdaq Stock Market under the symbol KYAK.

Investor interest in Kayak contrasts with Facebook’s arrival on Wall Street. Facebook raised $16 billion in the third-biggest IPO in US history, but its initial $38 share price sank to a low of $25 in June. The social media giant’s shares traded at $28.74 on Friday, down about 1 percent from the previous day.

After Facebook went public, there was a 40-day drought in the market for initial public offerings, according to Nick Einhorn, research analyst at Renaissance Capital, a Greenwich, Conn., investment advisory firm. The dry spell broke on June 26, with an initial offering by EQT Midstream, a Pittsburgh energy company. A Burlington software company, Exa Corp., was the first tech company to go public after Facebook. That company raised $62.5 million in a June 27 offering.

The chill seems to be gone, Einhorn said, with five of the eight companies that have gone public since late June trading at more than 20 percent of their offering prices.

“We are seeing in these past couple of weeks that Facebook hasn’t killed the market for IPOs,” Einhorn said. “There is definitely an appetite for [companies] that are fast growth and have some unique angle.”

Kayak originally filed to go public in August 2010, but held off because of the uncertain market. Although the company was expected to finally make its debut in May, it delayed the offering again after Facebook share prices fell. Kayak declined to comment on its stock performance, although a statement from the company called its offering “an important and exciting milestone.”

Another tech company — Palo Alto Networks Inc. of Santa Clara, Calif. — also had a successful IPO this week. The enterprise software maker priced its initial public offering shares at $42 on Thursday, raising $260 million. Trading under the symbol PANW, its shares closed at $53.13 on Friday, 26 percent over the initial price.

Kayak makes most of its money through online advertising that appears on its site and referral fees when its users buy tickets from partner websites such as Orbitz or Travelocity. It has carved out a niche in the expanding online travel market with its simple search tools for airfare prices and hotel deals, said Ali Naveed, senior analyst at Trefis, a Boston investment advisory firm. “They have seen tremendous growth in the past few years, and the online travel industry hasn’t been exploited to its fullest potential,” Naveed said.

Kayak is facing stiff competition from Google Inc. and Microsoft Corp., both of which have their own travel products, Naveed said. In 2010, Google made a significant acquisition for its travel product when it bought ITA Software Inc. of Cambridge in 2010 for $700 million.

Eight-year-old Kayak has 185 employees, and reported revenues of $224.5 million in 2011, a 31 percent jump over the previous year. The number of queries it processed for travel information nearly doubled from 2009 to 898.5 million last year.

Michael B. Farrell can be reached at michael.farrell@globe.com.

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Kayak: First day of trading
SOURCE: Bloomberg News
Daigo Fujiwara / Globe Staff