Kayak’s IPO dilemma

September 23, 2011, 10:09 PM UTC

Kayak is a reasonable IPO candidate. But it shouldn’t be in registration right now.

Online travel search company Kayak amended its IPO filing this week, explicitly acknowledging that Google’s (GOOG) acquisition of ITA Software – which once shared a couple of investors with Kayak – could become problematic.

Kayak is one of the companies that Benchmark Capital’s Bill Gurley discussed in a recent blog post arguing that if you’re going to file for an IPO, you had better price. And not in a good way, since it’s now been on file for over 10 months.

Let me add a corollary, based on a recent conversation with a banker who underwrites tech IPOs: If you’re going to file for an IPO and a massive exogenous event occurs, it’s okay to pull the filing. What it’s not okay to do, however, is just sit there and let the filing fester.

For Kayak, therefore, the banker suggests it should have pulled the moment Google announced the ITA acquisition received regulatory approval to acquire ITA Software (it had been part of a coalition that lobbied to block the deal). It wouldn’t have suffered the negative stigma of a failed offering, because the decision would not have been a direct reflection on the company’s underlying financials. Just an acknowledgement of some exogenous upheaval, with Kayak able to later re-file with a story about how it had analyzed the threat, responded to it and become ready to move forward.

Instead, Kayak is stuck in registration no-man’s land: Weaker financials than when it filed — in terms of net income — in a market where even the strongest registrants are reluctant to price. Google may have caused many of Kayak’s IPO problems, but at least one of them was self-inflicted.