Expedia Inc. (NASDAQ: EXPE) is going to see its shares trade on a WHEN ISSUED basis for it and for its TripAdvisor unit, which shareholders approved the spin-off for on Tuesday afternoon. The details of this spin-off have been out for some time, but we have one view cautious or “Neutral” view on this special situation.
Bank of America/Merrill Lynch has a report this morning noting that the TripAdvisor spin-off could add $2 to $3 per share as both stocks will trade on a WHEN ISSUED basis starting today. The report noted, “TripAdvisor is a high growth, high margin asset with a defensible lead in the advertising supported travel vertical that may be undervalued within the larger and much slower growing Expedia.
The report also noted Expedia’s current stock price of about $29 is valuing TripAdvisor at 7.5 to 10.5-times 2013 expected EBITDA assuming a 5 to 6.4-times multiple for the remainder of Expedia.
The firm’s combined Expedia price target objective is unchanged at $33.00.
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