Preview Travel (A)

William A. Sahlman; Nicole  Tempest; Daniel H Case III; Robert  Keller

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Case | HBS Case Collection | October 1998 (Revised May 2001)

Preview Travel (A)

by William A. Sahlman, Nicole Tempest, Daniel H Case III and Robert Keller

Abstract

Preview Travel was a leader in the online travel industry, having generated $80 million in bookings in 1997 and growing at a 34% compound annual growth rate per quarter. This case describes the evolution of Preview Travel's business plan and financing strategy and highlights a financial turning point that the company faced in August 1997. In August 1997, the company was in need of an additional cash infusion and had received strong indications of interest from a major U.S. media company. However, Preview Travel was disappointed with the offer the media company eventually made--$4.50 a share--since it was significantly less than the Series E round a year earlier ($9.00 a share). An investment bank advising Preview Travel believed that Preview Travel could garner a higher valuation in the public market and recommended that the company consider an IPO as an alternative means of raising capital. However, there were risks to this strategy. Closes with the question of whether Preview Travel should accept the "sure" but low offer from the media company or pursue an accelerated and potentially risky IPO.

Keywords: Risk and Uncertainty; Business Model; Initial Public Offering; Valuation; Internet; Business Plan; Capital; Financial Strategy; Travel Industry; United States;

Format: Print

19 pages

Educators Purchase

Citation:

Sahlman, William A., Nicole Tempest, Daniel H Case III, and Robert Keller. "Preview Travel (A)." Harvard Business School Case 899-085, October 1998. (Revised May 2001.)