Expedia 2006 Annual Report Download - page 20

Our stock price is highly volatile.
The market price of our common stock is highly volatile and could continue to be subject to wide
fluctuations in response to factors such as the following, some of which are beyond our control:
• Quarterly variations in our operating results;
• Operating results that vary from the expectations of securities analysts and investors;
• Changes in expectations as to our future financial performance, including financial estimates by
securities analysts and investors;
• Changes in our capital structure;
• Changes in market valuations of other internet or online service companies;
• Announcements of technological innovations or new services by us or our competitors;
• Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships,
joint ventures or capital commitments;
• Loss of a major supplier participant, such as an airline or hotel chain;
• Changes in the status of our intellectual property rights;
• Lack of success in the expansion of our business model geographically;
• Announcements by third parties of significant claims or proceedings against us or adverse developments
in pending proceedings;
• Additions or departures of key personnel; and
• Market and volume fluctuations in the stock markets in general.
We may not be able to engage in desirable strategic transactions and equity issuances due to our
tax sharing arrangements.
Our ability to engage in significant stock transactions could be limited or restricted to preserve the tax
free nature of our Spin-Off from IAC. Current federal income tax law creates a presumption that the Spin-
Off would be taxable to IAC, but not to its stockholders, if either IAC or we enter into a transaction that
would result in a 50% or greater change, by vote or value, in IAC’s or our stock ownership during the four-
year period that begins two years before the date of the Spin-Off, unless it is established that the
transaction is not pursuant to a plan or series of transactions related to the Spin-Off. Treasury regulations
currently in effect generally provide that whether an acquisition transaction and a Spin-Off are part of a
plan is determined based on all of the facts and circumstances, including, but not limited to, specific factors
described in the regulations. In addition, the regulations provide several “safe harbors” for acquisition
transactions that are not considered to be part of a plan. These restrictions may prevent us from entering
into transactions which might be advantageous to our stockholders, such as selling the company or
substantially all of the assets of the company, issuing equity securities to satisfy financing needs or
acquiring businesses or assets with equity securities.
Under the tax sharing agreement with IAC, there are restrictions on our ability to take actions that could
cause the Spin-Off to fail to qualify as a tax-free transaction, including redeeming substantial amounts of our
equity securities and selling or otherwise disposing of a substantial portion of our assets, in each case, for a
period of 25 months following the Spin-Off, which period ends in September 2007. We would be required to
indemnify IAC against the taxes described in the preceding sentence if such tax is incurred by a breach of our
covenants under the tax sharing agreement.
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