TRX, INC.: Initial Public Offering
INTRODUCTION OF SOME SORT
IPOs are not sure things; therefore, when considering going public, one of the most important things to look at is the company’s future growth potential. Investors need the comfort of good future returns before they buy stock. The potential for growth at TRX exists, especially in moving away from customer-care, but the continuous reporting of negative net income poses a problem. Potential buyers will be wary to invest in a company that continues to lose money and has not disclosed a specific use for the money other than general growth purposes. This, compounded with the high cost of an IPO, illustrates the necessity for positive future growth, accompanied with decreasing operating costs, or the IPO will fail. However, operating in an emerging industry within a larger industry that will never disappear (travel), TRX does have the potential to become a front-runner in the market. TRX must capitalize on its positive characteristics, such as developing long-term relationships with customers. But with Expedia, Inc. accounting for 53% of the 2004 revenue, TRX needs to broaden the customer base while simultaneously watching the market for competition. The loss of Expedia, Inc., or another large account, to a competitor would be devastating to the IPO and future of the company. While the potential for a successful IPO exists, TRX has an equal chance of the IPO failing. Their relationship with Sabre Investments, Inc. threatens the uniqueness of TRX. Continuing the relationship could be damaging if TRX is associated with Sabre and not considered an independent operator.
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