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We have written in the past of the discount placed on Travelzoo (NASDAQ:TZOO) shares stemming from excessive short interest in the stock caused by the iron grip of its controlling shareholder and founder. We now ask if the scenario that exists in TZOO is a perfect environment for famed hedge fund disciples of Julian Robertson of Tiger Management known as the "Tiger Cubs." These well-trained managers have been known to ferret out opportunities like this "coiled spring" cash generating company. In fact, they would be joining Edward C. Johnson 3rd from FMR LLC with their current holdings of 1.39 million TZOO shares.

Certainly the stage is set for a classic meteoric rise in share price like the one recently seen in Sears Holding (NASDAQ:SHLD) and the international thriller seen in the Porsche Volkswagen saga in 2008, ultimately bankrupting famous German industrialist Adolf Merckle. The negative rebate (interest rate equivalent ) in TZOO is hovering around 40% annually for these hard to borrow shares needed for traders to sell short. This is down from a much higher rate earlier this year. In fact, the reduction in the negative rebate is a signal of a slight loosening of shares to borrow for those who want to sell short and may be causing the recent downdraft in the stock. It seems short sellers are again desperately trying to depress the TZOO shares to scare off prospective investors.

TZOO has no risky debt instruments on its balance sheet and therefore no default issues or pending implosion often seen in highly shorted stocks.Travelzoo is a growing business that's a hybrid of TripAdvisors (NASDAQ:TRIP) and Groupon (NASDAQ:GRPN), albeit a niche player in those market segments and trading at a fraction of the peers' sales-to- market-cap multiples. The most recent short interest number tells us that there are still many traders betting against TZOO, possibly for only one reason - the controlling shareholder discount. We believe that this reason may actually be the catalyst minority shareholders can look to rebound their stock's value. In reality, this control shareholder can be seen as a backstop in the case of a squeeze because of his desire to hold the majority of TZOO. We have written of other possibilities to unleash value at TZOO that the control shareholder could single-handedly embark on as well. But if he does absolutely nothing, it might just be the perfect setup for the next big melt up.

Source: Tiger Cubs BeLong In Travelzoo