What happened
Shares of Expedia Group (EXPE -2.12%) jumped as much as 12% on Wednesday after rumors spread that the online travel specialist could receive a $1 billion investment. As of 2:40 p.m. EDT, the stock was up 7.6%.
So what
The Wall Street Journal is reporting that Expedia is in talks with private equity firms Silver Lake and Apollo Global Management regarding a $1 billion investment. Terms of a potential deal aren't yet known, but liquidity to get through the current downturn in travel and consumer discretionary spending would be welcome news for Expedia.
Image source: Getty Images.
Travel companies are really just trying to raise enough money to survive right now, and that's what this investment could be. I think the travel industry will recover eventually, but the cash needed to get through the COVID-19 crisis is what's top of mind for investors.
Now what
This is a bullish sign for Expedia long-term if financing does come through. The company was solidly profitable in 2019, with $565 million in net income, and its current $8.6 billion market cap puts it at a P/E of about 15. That figure will likely get worse if equity or warrants are part of a capital raise, but I still think owning shares of one of the top online travel companies coming out of this crisis will be a smart bet for long-term investors.
