Transfer Pricing Associates

Groupon Raised $700 Million for its IPO

post Wednesday November 16, 2011



Nov. 4th 2011-- Groupon. Inc, the internet daily deal site, who raised $700 million after increased the size of its initial public offering, is valued at $12.8 billion. It is considered to be the largest IPO for internet companies since Google in 2004.

Groupon, derived from “group coupon”, who sells daily deals from local and national retailers, is one of the most watched companies of the year. The three year company earned huge success when it was first established. The company has expanded its business into other countries mostly through mergers and acquisitions. It now operates in 500 markets and 44 countries and IPO is considered as an efficient way to raise funds and suit the international expansion of the company. Although Groupon has enjoyed huge success, its recent performance is hardly satisfying. The company is facing increasing competitions from other daily deal sites such as Living Social and the recent lawsuit from its employee has hurt the reputation of the company. Moreover, the earning prospect is not ideal either. It is reported that the company has lost about $100 million per quarter and based on the balance sheet, it has lost $238 million over the last nine month. Many investors and analysts have expressed their concerns about the company’s ability to generate long-term profit and revenue growth. Moreover, potential competition from deep pocket companies such as Google and Amazon will further affect the future earnings of Groupon.

The road to Wall Street has been a bumpy ride for the Chicago-based company. Andrew Mason, the CEO of Groupon, with his colleagues spent almost two week to convenience the Wall Street investors to raise funds. The easy to replicate business model, slowing growth and accounting issues are the main concerns from investors. Some investors and analysts even consider that Groupon should not go public. When Groupon rejected the $6 billion offer from Google in later 2010, the company is valued at $20 billion. However, now it is valued at $12 billion, an 8 billion drop. Groupon also received resistance from regulator due to its accounting measures and statements. In the last 18 months, Groupon has changed its accounting measures twice, which lead to a almost 50% drop of its revenue, to address the questions from and regulator and two senior executives have left the company.

The negative news certainly affects Groupon, but it is still the largest IPO for internet companies since Google. Quote from BoyanJosic, chief executive at DailyDealMedia, said “Groupon is a company with permission to market to 150 million consumers daily. No other company in the world has ever had that type of reach."

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