Travelzoo ( TZOO) bulls could be in for a long day.

Shares of the online travel-publishing firm were lower after the company announced late Wednesday that regulators have given a group of hedge funds the green light to sell 750,000 Travelzoo shares.

The stock is off $7.43, or 12%, to $55.33.

After nearly a three-month review, the Securities and Exchange Commission officially approved a registration statement filed by Travelzoo that permits the hedge funds to sale those shares at any time. The hedge funds bought the stock in a Sept. 30 private placement that raised $30 million for the company.

With Travelzoo's stock closing Wednesday at $62.75, the hedge funds -- which picked up the shares for about $40 apiece -- are expected to sell most of those shares in the next few days.

A few weeks ago, the hedge funds stood to make even more off of their Travelzoo investment. Last year, Travelzoo shares traded as high as $100 a share and the stock soared more than 1,000%. In 2004, Travelzoo was one of Wall Street's top gaining stocks.

But in 2005, shares of Travelzoo have been sliding. The stock is down 35% this year. On Monday alone, the stock slid 25% after the company announced disappointing fourth-quarter earnings and reported that the SEC is looking into stock transactions by its employees, including those of Ralph Bartel, the company's founder, chairman, CEO and CFO.

Much of Travelzoo's rise last year stemmed from its low float: With few shares available for trading, volatility has been high. That's 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 force the stock higher.

Critics argue that Travelzoo's gains from 2004 could quickly evaporate in 2005, with so many new shares hitting the market in a short period of time. In addition, Bartel, the company's largest shareholder, has filed a still-pending registration statement to sell another 750,000 shares.

An influx of 1.5 million shares to the market would nearly double the stock's existing float.

A person associated with one of the hedge fund buyers says he expects a lot of investors "will try to pile out soon.''

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