Priceline shares jump on insider sale
The stock shot up nearly 30 percent on word that the founder is planning to sell his stake in the company for $110 million.
Jay Walker will sell 25 million shares, about 30 percent of the company, to Cheung Kong Holdings and Hutchison Whampoa, pending regulatory approval. Walker already sold $25 million worth of his Priceline shares to Hutchison in February.
Cheung Kong and Hutchison Whampoa are conglomerates whose holdings include a telecommunications company, property and hotels, and ports and utilities. Most of these properties are centered in Hong Kong and China. Hutchison formed a joint venture with Priceline just over a year ago to bring the Priceline model to Asia.
The deal makes the two companies the largest shareholders in Norwalk, Conn.-based Priceline and gives them two more seats on the company's board of directors.
Priceline shares jumped nearly 30 percent, up $1.61 to $7.06 by market close.
"The change in ownership is good for Priceline because it indicates the support of a sophisticated and strategic investor and eliminates the potential overhang of continuing significant share sales by Jay Walker," wrote Legg Mason analyst Thomas Underwood. Underwood reiterated a "buy" rating on the stock.
Priceline is best known for its "name your own price" service, which it offers for products including air travel, hotels and car rentals.
While the company has struggled, it may manage to reach the holy grail of dot-coms--a profit; the company predicts a profit in the second and third quarters.
Priceline, whose stock has plunged from a 52-week high of $51.50, recently told analysts that it was "in a turnaround mode."
On Wednesday, Goldman Sachs analyst Anthony Noto upped his second-quarter earnings and revenue estimates for Priceline, saying that "the worst is behind the company."
"While Priceline is still in nascent stages of its turnaround phase, we think that first-quarter results demonstrated that the company is on sound footing with a viable travel business with profitability beginning in (the second quarter)," he wrote in a research note.
Noto said industry factors, including a greater supply of airline seats, should help the company. He also pointed out that the company's chief financial officer recently announced plans to purchase around $250,000 worth of shares, a strong signal of management confidence.
For the second quarter, Noto increased his revenue estimate from $304.8 million to $315 million, and his earning per share estimate from 2 cents to 3 cents. He has a "market outperform" rating on the stock.