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Preview Travel to sell shares

Less than five months after Preview Travel launched its IPO, the company files to sell another 3 million shares of its stock.

Less than five months after Preview Travel (PTVL) launched its IPO, the company has filed to sell another 3 million shares of its stock.

The online travel company said about 1.5 million shares will be sold by the company and 1.5 million shares will be sold by certain stockholders. Preview Travel expects the offering to commence in mid-to-late April.

The net proceeds from the offering will be used by Preview Travel for general corporate purposes and working capital, as well as for promotional and marketing expenses, according to its annual report filed this week with the Securities and Exchange Commission.

Preview Travel's operating expenses are expected to increase substantially in 1998, as compared with 1997, primarily due to commencement of the company's payment obligations to partners such as America Online (AOL), Excite (XCIT), Lycos (LCOS), and Fodor's.

As of December 31, 1997, Preview Travel had an accumulated deficit of $25.8 million. For full year 1997, the company reported revenues of $13.6 million.

The company's deals with AOL, Excite, and Lycos accounted for 77 percent of revenue, 62 percent, and 15 percent, respectively, for the quarter ending in December. Revenues from MCI, derived from advertising on the company's travel television programming, accounted for 10 percent.

Termination of the agreements with AOL and/or Excite likely would have a material adverse effect on the company's business, operating results, and financial condition, the filing said.

The company's agreements with AOL and Excite require minimum aggregate payments of about $56 million over the next five years, in exchange for distribution, marketing, and other services.

Preview Travel raised $27.5 million from its offering of 2.5 million shares of common stock at $11 a share last November, in a less-than-robust initial public offering.

Shares gained just 6 percent, to 11-5/8, falling below the average first-trade gains, according to Securities Data. During the month following the offering, the stock sunk to as low as 6-7/8.

Since the offering, however, as Internet stocks have been breaking records with exponential growth, Preview Travel has climbed more than 400 percent from that low, to today's close of 36-3/4.

The company's business operates with increasing competition from other entities that maintain similar commercial Web sites, such as Microsoft's Expedia, Travelocity, Cendant, TravelWeb, and the Internet Travel Network, among others.

Will Hearst, III, general partner of Kleiner Perkins; Ted Leonsis, president of AOL Studios; and David Pottruck, co-CEO and president of Charles Schwab, are on the company's board of directors.

AOL and Kleiner Perkins each hold about a 10 percent stake in Preview Travel, and MediaOne Group, formerly US West Media Group, holds a 9.1 percent stake.