Shares of travel platform Tripadvisor (TRIP -3.16%) got hammered on Wednesday after reporting quarterly financial results, revealing that the company wasn't for sale, and as investors grappled with concerning commentary from Liberty Tripadvisor Holdings. As of 1:30 p.m. ET, Tripadvisor stock was down 28%.
Pull up a seat -- this story is tricky
This confusing story is hard to succinctly explain, but here goes: Liberty Tripadvisor is an independent holding company and holds more than 29 million shares of Tripadvisor, between Class A and Class B shares. However, its Class B shares give Liberty Tripadvisor full voting control over Tripadvisor. And right now, Liberty Tripadvisor is in financial trouble.
Liberty Tripadvisor has redeemable preferred stock with a redemption date of March 27, 2025. To redeem this stock from holders, it will cost the company around $300 million, and it doesn't have the money.
Liberty Tripadvisor could sell its shares of Tripadvisor, but it doesn't want to lose voting control. But it has limited options. And if the largest shareholders dumps shares, that would certainly be at least a short-term headwind for Tripadvisor stock.
This situation is further complicated because Tripadvisor was considering selling the company. However, it announced today that it doesn't plan on selling. So this potentially easy solution for Liberty Tripadvisor is now off the table, which is why both stocks are down big today.
Things are otherwise good
This confusing story is overshadowing Tripadvisor's encouraging financial report. The company's net loss was larger than expected, which is upsetting to some. But this was due to settling a tax issue from almost a decade ago -- adjusted profitability beat expectations.
Moreover, while growth for the core platform has plateaued, Tripadvisor's experience platform Viator continues to gain ground. In the first quarter of 2024, Viator's revenue was up 23% year over year to $141 million, and gross bookings surpassed $1 billion.
Tripadvisor has a hot growth opportunity with Viator. And that's why I'm personally happy management isn't exploring a sale of the company right now.
