Investors in Travelzoo (Nasdaq: TZOO) have had quite the ride over the past year. The stock, which a year ago was hovering around $15 per share, zoomed up 500% to a high of more than $100 after announcing earnings this past April, only to drop 40% since then on very little news.

What do they do?
Often misunderstood as a competitor with companies such as priceline.com (Nasdaq: PCLN), Expedia (Nasdaq: EXPE), or Orbitz (NYSE: OWW), Travelzoo offers high-end, prepackaged travel deals that aren't available anywhere else on the Internet. The company has also entered the "deals" market with its Local Deals offerings (think "high-end Groupon") in several U.S. cities.

In addition, Travelzoo is making serious inroads in the international community. The company currently has local deals posted for London, Paris, Berlin, Budapest, and Madrid. After watching Google's (Nasdaq: GOOG) failed buyout of Groupon priced at nearly $20 billion, Travelzoo's modest market cap of just over $1 billion seems small.

With the natural progression of international deals eventually leading to Asia, one could see why Travelzoo would be a tempting buyout target for Chinese Internet leaders Baidu (Nasdaq: BIDU) or Sohu.com (Nasdaq: SOHU). Baidu probably makes the most sense as a suitor. It has the most cash on hand to make a purchase; although Sohu could use the purchase to take search market share away from larger Baidu.

So what's the problem?
With a differentiated product, a high-margin deals market, and international appeal, one would think shares of Travelzoo would be zooming up -- or at least holding steady. And yet, that hasn't been the case. As a shareholder myself, I've been perplexed by this ... until I took a look at recent insider trades.

Ralph Bartel, Travelzoo's founder and former CEO, held 66.2% of the company's shares outstanding as of March 31, 2011. Since then, he's been busy selling. Take a look below to see how fast he's been unloading shares.

Date

Shares Sold
June 3 68,839
June 2 499,116
June 1 196,944
May 31 600,000
May 27 18,410
May 26 95,000
May 25 198,904
April 29 28,144
April 28 100,000
April 27 180,000
April 26 320,000
   
 Total 2,305,357

Source: Yahoo! Finance.

Don't hit the panic button
Normally, selling 2.3 million shares of one's own company would be a huge red flag for me as an investor. But actually, I'm not that worried. Bartel still owns 8.6 million shares, or roughly 52% of the company.

I would wager that the reason for the price drop has to do with the increase in float (or shares that are available for trading on the open market). When Bartel was holding tight to his shares, there were only 5.54 million shares available for guys like me to buy. Bartel's selling spree increased the amount of available shares by 41%. Whether its coincidence or not, that's almost exactly how much the price has fallen since Bartel started selling.

In the short term, this means that supply of shares far outstripped normal demand. When this happens, the price of a stock (or anything, for that matter) drops.

But over the long haul, the number of shares outstanding hasn't changed one bit because of this. Eventually, the stock's price will reflect its ability to grow earnings per share -- and not the amount of shares available for trading.

In the mean time, I invite you to add Travelzoo to your watchlist. Now seems like a great time to buy into the company -- which is exactly what I'll be doing two days from now!