Groupon aims for less flashy IPO

A newly amended filing shows the Nov. 4 offering will list shares between $16 and $18 -- much lower than previous estimates.

By InvestorPlace Oct 21, 2011 1:19PM

By Tom Taulli, InvestorPlace IPO Writer

Unless there's an implosion in the stock market, Groupon should be a publicly traded company within two weeks or so. To get things rolling, the company on Friday filed its latest amendment to its S-1, the formal IPO document that provides all the necessary information for investors to evaluate the deal.

The listing will be on the Nasdaq with the symbol GRPN, and the IPO date will be Nov. 4.

The last step is for the company's 30-year-old CEO, Andrew Mason, to pitch the deal on the road. Hopefully, he won't be too goofy, which has been his reputation.

Based on the filing, Groupon's bankers, which include Morgan Stanley (MS) and Goldman Sachs (GS), feel comfortable selling 30 million shares at $16 to $18 apiece. At the top of that range, the company would sport a valuation of $11.4 billion, and it would be trading at more than six times revenues.

This is a big letdown from its prior valuation of $25 billion to $30 billion just months ago. Still, Groupon is just 3 years old and, when it goes public, will be worth more than many major companies that trade on the U.S. exchanges, such as longtime operators like J.C. Penney (JCP) and Best Buy (BBY).

So why complain?

One big concern for the Groupon IPO has been the company's massive losses. But according to the recent filing, Groupon is getting a handle on things. In the third quarter, Groupon's operating loss was only $239,000, which compares with a loss of $56 million in the same period a year ago. Groupon's North American business actually enjoyed an $18.8 million profit.

It certainly helps that Groupon has been slashing its marketing budget. However, there has been a slowdown in growth. The third quarter saw revenue of $430.2 million, up only 9.6% from the prior quarter -- Q1-to-Q2 growth was 32%. Perhaps spending less on marketing expenditures is taking its toll?

How will this latest IPO do? Keep in mind that underwriters try to sell shares at a discount, which helps to generate demand. This appears to be the case with the Groupon offering. And only 5% of the outstanding shares of the company will be allocated, which is fairly low. This scarcity -- given the success the strategy has seen with other dot-coms like Zillow (Z) and LinkedIn (LNKD) -- should make it even easier to sell the shares.

All in all, Groupon's bankers' efforts to juice up the stock might just work.

Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of All About Short Selling and All About Commodities. Follow him on Twitter at @ttaulli. As of this writing, he did not own a positioning any of the stocks named here.

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Oct 22, 2011 10:36AM
Do ya' think?   This company has a life expectancy of two years, if that, and all of it downhill.  (Maybe they should get deals of ski lift tickets, downhill only!)  Local competition is close on its heals and its "fad" is running out very fast.  I certainly hope none of my mutual funds buy any of this junk offering.  
Oct 22, 2011 10:10AM
groupon=piece o' crap mindless marketing bloodsucking idots selling what they don't own to discount and encourage a further drain on the funds available to a operator...least ways groupon targets big box corporate entitys
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