Photographer: Taylor Weidman/Bloomberg

Tiger Global’s Despegar Marks First Argentine IPO of 2017

  • Company raises $332 million as IPO momentum starts to build
  • Expedia partner Despegar offers Latam online travel services

Online travel company Despegar.com Corp. met its goal of raising $332 million in the first overseas initial public offering for an Argentine company in more than 16 months.

The Buenos Aires-based online booking company sold 12.77 million shares at $26, pricing at the top if its range and marking only the third IPO since President Mauricio Macri took office in 2015. The company, which operates under the Despegar brand in most of Latin America and Decolar in Brazil, sells airline tickets, travel packages, hotels and other related products. Shares rose as much as 17 percent to $30.4 per share after opening on the New York Stock Exchange today under the ticker symbol "DESP."

Investment firm Tiger Global Management, whose biggest long bets include online retail stocks such as Priceline Group Inc. and Amazon.com Inc., is the top shareholder of Despegar and had a majority ownership in the company prior to the offering. The two other largest holders are online partner Expedia Inc. and private equity firm General Atlantic Partners. The company’s IPO price gives it a market value of almost $1.8 billion, based on the 67.2 million shares to be outstanding after the offering.

"One of the reasons we had such great results was that pure tech funds and funds looking for emerging market risk looked at the company, and we saw demand from both," said Damian Scokin, chief executive officer of Despegar, in a phone interview. The sale, which was over 13 times oversubscribed, received demand by long-term equity institutional funds as well as hedge funds, he added.

Interest in Argentina’s equity market is gaining momentum. Since Macri took office, Grupo Supervielle SA snapped a two-year initial public offering drought in New York and Buenos Aires in May 2016 while confectioner Havanna Holding SA listed locally a month later.

Other companies are turning to equity markets to raise funds, with Argentina’s three major banks having completed follow-on share sales in New York so far this year. In addition to Despegar, cement company Loma Negra Cia Industrial Argentina SA and agribusiness company Molino Canuelas SACIFIA have filed their intent to sell shares in an IPO with the SEC.

Consumption Bet

Despegar’s sale comes amid an economic recovery in the company’s key markets.  Brazil and Argentina, which account for 41 percent and 25 percent of company revenues according to the prospectus, are picking up. Brazil’s economic activity in July expanded more than analysts expected, indicating the timid recovery that began in the second quarter continued into the third quarter. Argentina’s economy has also seen an incipient recovery, with the most recent figures showing it grew 3.3 percent in May from a year earlier.

"This year has been an inflection point in terms of consumption, and all categories are improving -- travel is no exception," Scokin said. "We’re using these funds to focus on financing the growth of our business, hiring more people on our IT team, and to increase amount of hotels, tourist packages and vacation rentals we offer in Latin America."

The company is not analyzing acquisition opportunities at the moment.

Despegar will be prioritizing growth in Mexico and Colombia, both in the number of packages it offers and in sales, Scokin said. The company, which focuses on promoting its brand and increasing its products to increase sales, is currently growing fastest in Mexico, Brazil and Argentina, he said.

Latin America online travel bookings are projected to grow 12.5 percent to approximately $47.6 billion by 2020, according to data by Euromonitor International cited in the company’s filing. The company’s sales, or gross bookings, are also forecast to rise by 12 percent in 2017, according to Buenos Aires-based consulting firm Delphos Investment.

"Investors are seeing the potential in a company that’s exposed to Latin American consumption trends that are going through a cyclical recovery period," said Delphos analyst Manuel Terre by phone. "We expect the company’s gross bookings to grow at attractive rates."

— With assistance by Alex Barinka

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