Groupon Sets IPO Date and Starts Holding Its Breath
Groupon has done a little waffling about its IPO plans but has decided to take the plunge. Whether it's the right deal at the right time is the big question. "I can understand why they're doing it," said tech analyst Jim McGregor. "We've seen their value tank over the last few weeks because of the market. Now they'll be pushed to reinvest the investment dollars, or their stock is going to tank."
10/21/11 2:59 PM PT
Groupon has packaged a new deal, and it's going worldwide. The Internet coupon star will go public on Nov. with an IPO designed to raise as much as US$621 million, valuing the company at $11.4 billion. That's just 5 percent of the company's shares.
The numbers look big on the surface, but the total is smaller than the original expectation of $750 million to nearly $1 billion -- a valuation of $15 billion -- that was trotted out back in June.
Groupon plans to open the selling at $16 to $18 per share and list on Nasdaq under the symbol GRPN. The company is preparing to speak loud and publicly next week to entice investors.
Sweeter Numbers This Quarter
What a difference a month makes. Groupon's newly released financials are stronger than those that were circulated in September as it put its IPO on hold in the face of market volatility.
Groupon's amended S1 filing shows a narrower quarterly loss and a drawback on its marketing spending. The company trimmed its net loss from the third quarter to $10.6 million from $49 million in the same period last year.
The filing reveals significant growth from last year. Third-quarter revenue rose to a whopping $430.1 million from $81.8 million. Marketing spending was ratcheted down to $181 million in the third quarter, or 42 percent of revenue -- down from 54 percent in the second quarter.
The company enjoyed growth in the face of increasing competition with coupon offers. Groupon hit 142.9 million subscribers at the end of the third quarter, up from 115.7 million in Q2. The number of subscribers who have actually purchased a coupon hit 25.9 million, up from 23 million in the second quarter.
A Good Time for an IPO
The investment world was expecting a Groupon IPO -- it's been touted for months. Now that it's here, how's the timing?
"It had to happen and it's a good time," Laura DiDio, principal analyst at ITIC, told the E-Commerce Times. "The calendar's fourth quarter is a perfect time, right before the holiday season."
Groupon could still have a rough time, though, since Wall Street likes to trash its companies, DiDio noted.
"They trashed Apple the other day. Apple stock took a $20 hit, and it was just because iPhone sales slumped while customers were waiting for the 4S," said DiDio. "There's no rhyme nor reason."
Groupon's numbers look good, she noted, and it was a good idea for it to hold off for a while.
"I've seen a lot of companies over the last 10 years in the post-dot-com era pull back their IPOs," said DiDio, "so it made sense for them to pull back until they could show better numbers."
One of the criticisms of Groupon is that its coupon business could be easily replicated. Perhaps its one advantage is a head start.
"On the surface, it would be easy to imitate, but you still have to have the capital," said DiDio. "In these times, people are not so anxious to get into it. So yes, Groupon has a valid business model. Now they have to market it and differentiate it. Getting a head start isn't enough. Look at Yahoo."
Or Maybe Not the Right Time?
On the other hand, Groupon may be looking to cash in early simply because of pressure from emerging daily deal competitors.
"If I were Groupon, I would look at waiting a year," Jim McGregor, chief technology strategist at In-Stat, told the E-Commerce Times. "Companies often rush to get out their IPOs. With Groupon, it's probably because they're facing so much competition."
There are few barriers to entry in the coupon business, McGregor noted.
"Under normal conditions, I think it would be best for Groupon to wait a year, but they probably need the money," he said. "I can understand why they're doing it. We've seen their value tank over the last few weeks because of the market. Now they'll be pushed to reinvest the investment dollars, or their stock is going to tank."