Orbitz debut a blow to owner Blackstone
July 23, 2007: Orbitz Worldwide, the US online travel site, suffered a lacklustre debut on the New York Stock Exchange as the value of its newly traded shares, which had already been priced below the expected range, fell a further 2.6 per cent.
The poor performance of the Orbitz initial public offering is a blow to Blackstone, which acquired the group in August 2006 as part of its $4.3bn purchase of Travelport from Cendant, the former travel and real estate conglomerate.
The proceeds of nearly $500m from the share sale are earmarked to repay debt at Travelport, which this year added to its debt load when it paid a dividend to Blackstone.
Orbitz shares ended New York trading on Friday at $14.50, down 3.3 per cent from its offer price of $15 each. Travelport had expected to sell Orbitz shares for between $16 and $18 each.
Meanwhile, Blackstone shares closed down 5.1 per cent at $25.95, hitting their lowest level since the private equity group co-founded by Steve Schwarzman and Pete Peterson went public last month at $31 per share.
Orbitz´s troubled debut could also increase concerns about so-called "quick flips" by private equity firms, in which portfolio companies are taken public shortly after being acquired.
In a study released last year, Josh Lerner, professor of investment banking at Harvard Business School, and Jerry Cao of Boston College, concluded that "quick flips" failed to create long-term value for stock market investors.
The study, which looked at nearly 500 private equity-led IPOs in the US between 1980 and 2002, found that although listed companies backed by buy-out groups outperformed both the market and traditional listings, "flips" did not.
Companies listed within 12 months of acquisition underperformed the S&P 500 by about 5 per cent in the ensuing three years.