Fri, June 03, 2011
Technology > Technology

The real deal? Groupon files for a US$750-million IPO

2011-06-03 03:23:18 GMT2011-06-03 11:23:18(Beijing Time)  SINA.com

Groupon headquarters in Chicago, Illinois. Daily deals site Groupon said Thursday that it was seeking to raise as much as $750 million in an initial public offering. (AFP/Getty Images/File/Scott Olson)

NEW YORK/PALOS VERDES, California – Daily deals site Groupon Inc filed for an initial public offering, hoping to capitalize on the biggest investor stampede into Web start-ups since the dotcom bubble burst a decade ago.

The company filed on Thursday to raise up to $750 million in its IPO, an offering that has been speculated about for months and that will be watched as a barometer of whether Internet valuations have become too rich.

In April, a source told Reuters that Groupon could raise as much as $1 billion in an IPO that could value it at $15 billion to $20 billion.

Thursday's filing did not specify the number of shares to be sold in the IPO, the price range, or the exchange, though it did say the shares would trade under the symbol "GRPN." It also said the $750 million figure is preliminary and may change.

Other Web companies including LinkedIn Corp and China's Renren Inc have had strong IPO premieres, and anticipation is building toward a fever pitch for potential offerings by Facebook and Twitter. Pandora, a Web radio company, raised its IPO size to up to $141.6 million on Thursday -- 40 percent more than estimates.

Some doubt whether the buzz surrounding the new Web generation is justified, warning that the hype is reminiscent of the atmosphere prior to the dotcom bust in 2001.

Groupon has also been called into question by critics who say its business -- essentially a coupon service -- can be easily replicated both by startups and existing Web powerhouses. Google has already begun such a service.

At the All Things Digital conference Wednesday, Groupon Chief Executive Andrew Mason himself admitted he feared possible competition from businesses that "have some twist on the model we haven't thought of yet."

"I think investors will go for this one," said Ryan Jacob, chairman and chief investment officer of Jacob Funds, which includes the Jacob Internet Fund. "Whether or not it's worth the valuation it comes at is still an open question."

Groupon in the filing warned that it has incurred losses ever since its birth 2-1/2 years ago, that its technology may not be up to the task of handling demand, that expenses are bound to rise, and that the market may not continue to grow.

"As with any business in a 30-month-old industry, the path to success will have twists and turns, moments of brilliance and other moments of sheer stupidity," Mason, 30, said in a letter to potential stockholders that was attached to the filing.

BUBBLE? WHAT BUBBLE?

Groupon backer Marc Andreessen, the Netscape co-founder who took part in a recent round of funding, waved off fears of an emerging tech bubble, citing historically low PE ratios.

Founded in November 2008 by Mason, a Northwestern University music major, Groupon offers discounts on everything from restaurant dining to sky-diving excursions. The "group" part of the name refers to the fact that many deals are activated only when a certain number of people sign up.

Discounts often run from 50 to 70 percent; on Wednesday it offered $20 worth of T-shirts at Old Navy, a Gap Inc chain, for $10.

Groupon, which has 83.1 million subscribers and deals with nearly 57,000 local merchants in 43 countries, is backed by some of the top venture capital firms in Silicon Valley, including Andreessen Horowitz, Battery Ventures, Greylock Partners and Kleiner Perkins Caufield & Byers. T. Rowe Price Group and Fidelity Investments also own a stake, among others.

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