Back in January, if you tried talking to an investor about

Travelzoo

(TZOO) - Get Report

, he probably would've responded with a question: "Travelwho?"

Twelve months later, most investors and traders are kicking themselves for not hitching a ride on the Travelzoo express when the stock went for $9. Today, with Wall Street set to close the books on 2004, shares of the online travel publishing company are trading around $102, a whopping 1,033% gain.

Technically, shares of

Ionatron

(IOTN)

, up 2,058%, have posted an even bigger gain. But shares of this electronic weapons manufacturer only recently moved from the OTC Bulletin Board to the Nasdaq SmallCap Market. Moreover, Ionatron's surge from 50 cents a share to $10 a share isn't quite as impressive as Travelzoo cracking the magical $100 threshold.

Travelzoo's rise from market obscurity to stock of the year is even more improbable when you consider how much ink was blown --

including by this reporter -- incorrectly calling its demise.

Meanwhile, the three analysts who follow Travelzoo all initiated their coverage with sell recommendations. The short interest on the stock has risen from zero shares in January to 1.5 million in mid-December. So many traders are betting Travelzoo's stock is ready to tumble that 71% of the company's shares available for trading are sold short.

The only other stock trading on the

Nasdaq

with a higher percentage of negative bets against it is

Cal-Maine Foods

(CALM) - Get Report

, an egg-packaging and distribution company whose shares are poised to close out the year down 30%.

The surge in Travelzoo's fortunes has been especially good news for a group of hedge funds and other wealthy investors who purchased 750,000 shares of the company's stock in a $30 million private placement in September. Price tag: $40 a share. Those investors are still waiting to collect on their bet because the

Securities and Exchange Commission

has yet to sign off on a registration statement that would permit them to resell those shares.

Even happier is Ralph Bartel, the 38-year-old former advertising executive who founded the company in 1998 and serves as its chairman, chief executive officer, president and chief financial officer. As Travelzoo's biggest shareholder, owning 85% of the company's 16 million shares, he's become a billionaire -- on paper, that is.

Earlier this month, Bartel filed a registration statement to sell 750,000 shares, a move that would enable him to turn some of that paper money into $76.5 million of the real stuff. But like the hedge fund investors, Bartel's planned sale is on hold pending the SEC approval.

Some think Travelzoo remains on borrowed time, sporting a price/earnings ratio of 391 and a price/sales ratio of 61. But is a bet against this stock ever a good one?

Critics argue Travelzoo's big stock gains could quickly evaporate in 2005, with so many new shares hitting the market in a short period of time. The influx of 1.5 million shares will wipe away some of the fortuitous technical forces that have contributed to Travelzoo's fantastic run.

The bears argue that much of Travelzoo's surge is due to a scarcity of shares available for trading, something that's led to enormous volatility in the stock. The volatility has made the stock a favorite with daytraders, who can push the price of Travelzoo shares higher and higher with their frenetic trading.

Compounding matters are all the traders betting against Travelzoo. Every time the stock soars, short-sellers rush to close out their positions by buying shares in order to avoid losing their shirts. But in doing that, the shorts only force the stock higher.

It's a Wall Street cat-and-mouse game that's been playing itself out for many months, with Travelzoo's supporters usually coming out on the winning side. But the bears have their eyes set on Jan. 28, the drop-dead date the hedge funds have given the company to get the SEC to approve the resale of the shares.

The stock's critics figure they win either way with the Jan. 28 deadline. If the SEC approves the registration statement, the much-anticipated dilution in Travelzoo's shares will come to fruition and the stock will likely decline. If, for some reason, the SEC doesn't approve the filing, Travelzoo is contractually required to start paying damages of about $300,000 a month to the hedge fund investors until the shares are permitted to be resold.

Now, $300,000 may not sound like a lot of money. But Travelzoo had just $6 million in cash and cash equivalents on its balance sheet at the end of September. More important, a failure of the SEC to approve the resale would likely be interpreted by investors as a sign of trouble for the company.

TheStreet.com

previously reported that the SEC, as part of a standard review of the resale registration filing, raised questions about some of the disclosures in the company's past filing.

Most significantly, regulators inquired about the identity of Travelzoo's two biggest customers, who account for one-fifth of its roughly $23 million in revenue. The SEC also asked Travelzoo to explain how it will account for proposed payments to stockholders who received some 5 million shares in a 1998 promotional giveaway.

The most recent registration statement filed by the company, however, did not shed any more light on either of these issues. Travelzoo has declined to comment for this story.

Of course, a ton of money has been lost betting against Travelzoo these many months. So don't be surprised if Bartel and the Travelzoo longs find themselves laughing once again come Feb. 1, much to the chagrin of the shorts.