On Friday, Expedia (EXPE) shares jumped on speculation that Executive Chairman Barry Diller was considering taking the company private at $30 a share, then spinning off TripAdvisor and cutting 400 jobs. The company put the kibosh on the rumors, saying “Expedia is not going private. We are not spinning off TripAdvisor and we’re not eliminating jobs.”

But maybe something else is happening. Scott Devitt, an analyst with Stifel Nicolaus, says he now thinks the probability of an LBO in the next 3-6 months is “approaching 0%.” But he contends there is a greater than 50% probability that the company will alter its capital structure by issuing incremental debt and buying back stock. He says the company could take out 21% of it shares by boosting its gross debt position from $500 million to $2.2 billion.

Meanwhile, Devitt thinks that TripAdvisor is “materially undervalued” as an operating segment of Expedia, and that it could be worth $1.5 billion to $2 billion as a separate company. He theorizes that one recap scenario would be for the company to swap TripAdvisor to Liberty Interactive (LINTA) in exchange for that company’s 22% stake in Expedia.

Eric Savitz

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