AOL + Travelzoo: 2 Shorts Can Tango

Includes: AOL, TZOO
by: ChaPaVe

As we have recently written, AOL, Inc. (NYSE:AOL) should be focusing on its core assets and stop its money bleeding business ventures.

Both AOL and Travelzoo,Inc. (NASDAQ:TZOO) have large short ratios. In the case of TZOO, over half of its float is short and is expensive to borrow, with up to a negative 45% rebate (its 52-week range is 15% to 100%), which is equivalent to 45% interest on an annual basis. Nasdaq reports short interest twice a month.

Reports have been hitting the net that Brizzly is being shut down to focus on once-dominant AIM and that the local site Patch is undergoing layoffs and talent departures continue, which under the strategy we recommend could be a good thing.

Now, in a very sane and sober world, the new leaner AOL management ranks should start to focus on how to spin off non-core assets and create cash flow from the core under-utilized assets such as the AIM platform and its demographically focused subscriber base. As we have outlined previously, the AOL user base would fit like a glove on top of Travelzoo's user base. The two together would make a beautiful Picasso together.

Ralph Bartel, founder, director and controlling shareholder of Travelzoo, can simply call his old contacts at AOL and make a deal. He has made deals with them before.

Disclosure: I am long TZOO.