Groupon Raises $700 Million After Increasing Size of IPO
November 4, 2011 11:06 AM
Groupon's IPO is the largest for an Internet company since Google in 2004, which raised $1.7 billion
Back in September, Groupon delayed its initial public offering
due to SEC questioning
and the dismal outlook of developed economies' stock markets. Now, Groupon has raised $700 million after increasing its IPO size to become the largest for an internet company since Google in 2004.
Deal-of-the-day website Groupon increased the size of its IPO by 5 million shares to 35 million total, with each priced at $20 when they were originally around $16 to $18. Groupon is now valued at about $12.8 billion.
Groupon's public float represents just over 5 percent of the company, and has helped increase price and demand. According to analysts, it will also support Groupon's share price Friday when it starts trading under GRPN on the NASDAQ.
However, some worry that Groupon will need to spend more in order to drive subscriber growth, and won't be able to compete with larger players like Amazon and Google. In addition, there are accounting-related concerns due to Groupon's altering of its IPO filings in order to "change the way it accounted for revenue."
Groupon CEO Andrew Mason and his team spent nearly two weeks on the road meeting with investors to address such issues. The long term is a concern for most in regards to growth and revenue.
"The post-IPO investor will be taking a risk on this deal," said Josef Schuster, founder of IPO research and investment house IPOX Schuster. "It's maybe a good trade for a day trader, in and out in a single day, but I don't want to be in it for the long run."
, Groupon cut its valuation by nearly half to make the deal.
If underwriters ended up buying just over 5 million more Groupon shares in the IPO, the company will raise more than $800 million.
"[Groupon] is a company with permission to market to 150 million consumers daily," said Boyan Josic, chief executive at Daily Deal Media. "No other company in the world has ever had that type of reach. Investors who truly understand this business model and the position that Groupon has in this market are buying."
Groupon, which fell under SEC questioning due to an internal memo sent by Mason in August that "lashed out" at company critics and discussed August revenue growth before the planned IPO, is asking more than twice what
offered to pay in order to buy the company last year with its $12.8 billion price tag now.
Groupon's IPO could set a trend for others, such as Zynga, which filed an IPO in June and is expected to start trading this month.
"Spreading the rumors, it's very easy because the people who write about Apple want that story, and you can claim its credible because you spoke to someone at Apple." -- Investment guru Jim Cramer
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