COLCHESTER, Conn., Nov. 23, 2004 (PRIMEZONE) -- At a client's request, Scott + Scott, LLC (nrothstein@scott-scott.com) has begun investigating the company Travelzoo (Nasdaq:TZOO) after the SEC reviewed a private placement and asked the company to name its two biggest customers and explain how it will account for shareholder payments who received such shares pursuant to a 1998 promotional giveaway. Travelzoo sold 750,000 common shares to a group of hedge funds on Sept. 30, raising about $30 million. Before the shares can be resold, SEC rules require they be publicly registered through a filing that is reviewed by the agency. While most of the SEC's questions for Travelzoo related to procedural matters, a few pertained to past disclosures.
In a 10-Q issued Monday, Travelzoo stated that two customers made up roughly one-fifth of its revenue. Those two customers, yet to be named, accounted for about one-fifth of the company's $23 million in advertising revenue. Of most interest was the issue about the company's handling of some 5 million free shares it distributed in 1998 to 700,000 people who signed up as initial subscribers to its Web site. Earlier this year, Travelzoo's board declared 4.1 million of those free shares invalid because the stockholders had not exchanged them for new shares after a corporate reorganization. The company has set aside just $220,000 to account for those shares.
In its 10-Q filed Tuesday, Travelzoo stated that one of these customers accounted for 11% of its revenue and the other makes up 10%. The loss of one of those contracts could have a material adverse affect on the stock. Yesterday, CEO Ralph Bartel stated in an SEC filing that he sold 30,000 shares of Travelzoo after exercising stock options at $3.90. Bartel is worth an estimated $1.3 billion. The stock has traded below $79.50 yesterday -- down from over $105 per share on November 10, 2004. Shares of Travelzoo Inc. (TZOO) fell 4 percent in Instinet pre-open trading today after Legg Mason initiated research coverage of the company with a "sell" rating.
If you are a shareholder or interested person and wish to discuss this announcement and/or have information relevant to the ongoing investigation, please contact Scott + Scott, LLC.
Scott + Scott, LLC, a Connecticut-based law firm with offices in Ohio and California, with a national practice and reputation. Scott + Scott dedicates itself to client communication and satisfaction. The firm is currently litigating major securities, antitrust and employee retirement plan cases throughout the United States and represents pension funds, charities, foundations, individuals and other entities worldwide -- in both class and non-class cases. Please visit our website at http://www.scott-scott.com to learn more about the firm, its practice and other cases. If you wish to discuss this action with an attorney or have any questions concerning this notice, your rights or any matter within our expertise, please contact attorney Neil Rothstein at nrothstein@scott-scott.com or by calling 800-404-7770 (EST) or 800-332-2259 (PST). You can dial direct in California at 619-233-4565. Scott + Scott, LLC is located at 108 Norwich Avenue, Colchester, CT 06415; phone: 860/537-3818; fax: 860/537-4432.