OpenTable Shareholders Apparently Booking Reservations in Empty Restaurants
Anyone who dismissed OpenTable’s IPO price of $20 as grossly overpriced has, in short order, been proven grossly mistaken. Shares in the online restaurant reservation company opened at $24.50 apiece, up 23 percent from its IPO price. As I write this, they’re trading at $28.72 after topping out at $30–more than double their original price range.
Astonishing for a restaurant reservation company going public in the middle of the worst recession in decades. And especially for OpenTable, which has posted operating losses in four of the last five years and saw the total number of reservations seated by its restaurant customers drop 10 to 15 percent for the fourth quarter of 2008 from the same period in 2007. Sure, revenue increased 36 percent in 2008 and 21 percent in the first quarter of 2009 compared to prior years. But come on–booking reservations in empty restaurants? At a time when the public is chowing down on Top Ramen?
“This [is] reminiscent of the 1999-2000 IPO pricings,” IPO Boutique partner Scott Sweet said in a research note to clients. “This IPO environment has not and should not see a pricing like what was chosen, considering the restaurant business is very prone to the recession. I believe that once sanity prevails, it will likely trade down hard.”