Hostelworld investors reassured on stake sale before slowdown

Investors in Irish travel website Hostelworld have received company assurances that a recent slowdown in trading wasn’t evident six weeks ago when key shareholders sold a £61 million (€80.2 million) stake.

Hostelworld raised more than €180 million from its initial public offering on the Dublin and London stock exchanges in November. On April 13th, its former private equity parent Hellman & Friedman and members of the Duffy family sold 23.5 million shares in the company at £2.60 each. That placing saw these shareholders sell their entire remaining 25 per cent stake in the group.

Terrorism

Shares in Hostelworld plunged by as much as a third on Thursday when the company reported weaker-than-expected demand across Europe in the aftermath of the Paris and Brussels terrorist attacks.

It made the statement ahead of the company’s first annual general meeting as a public company, in Dublin.

“We he been assured that there was no foreknowledge [of the impact on trading] until very recently,” said one investor, who declined to be identified. “They’ve been very prudent and been quite prompt in calling the weak trading.”

A company spokesman said Hostelworld “is fully aware of and complied with its disclosure obligations as a listed company.”

Another investor, Gervais Williams, managing director with London-based investment firm Miton Group, which bought shares at the time of the IPO and in last month's placement, said the trading update was "very disappointing."

“But we need to see a little more water under the bridge,” said Mr Williams, whose firm’s funds own more than 6 per cent of Hostelworld.

When questioned by reporters at the company's agm on Thursday about the timing of the sell-off, Hostelworld's chief executive Feargal Mooney said the move by the former shareholders had been well flagged and was part of "the natural cycle of investment".

Mr Kingsley Duffy, of the Duffy family who sold down their stake in April, said the first they learned of the slowdown was from the agm statement on Thursday.

Shares

Shares in Hostelworld fell a further 1.6 per cent in London yesterday, to £1.80 each.

"The AGM statement has come as a massive surprise to investors and the market," said Darren McKinley, an analyst with Merrion Capital in Dublin.

“We feel management need to do a better job at managing shareholder expectations in order for the company to become more investable.”

Mr Mooney said on Thursday he was somewhat surprised by the market sell-off as a result of the company’s trading update.