New York Times News Service | Groupon, the social buying site that spurned a $6 billion offer from the search giant Google, is pushing ahead with plans for its initial public offering, a debut that could value the company at $15 billion or more.
The company, which just raised a record $950 million from big investors, discussed a public offering with bankers this week, according to two people with knowledge of the deal who were not authorized to speak publicly on the matter. Banks are pitching Groupon on dizzying valuations at which they expect to take the company public, with many at $15 billion.
Groupon, which is expected to make its debut in the spring, is prepared to meet with bankers again on Friday, according to the two people.
A public offering, if it happens, will be a significant milestone for the startup, led by its young founder Andrew Mason, whose quirky personality has helped shaped the site. The offering, which would also be among the most anticipated since Google’s in 2004, would also represent the highest valuation on the company to date.
Since rejecting Google’s overtures, the company has been on the fast track for a public offering. In late December, Groupon hired its first chief financial offer, Jason Child, the former vice president of finance for Amazon’s international business. Child spent nearly 12 years at the giant online retailer, serving in a variety of financial roles.
Earlier this week, Groupon raised nearly $1 billion from large investors, including Fidelity Investments, T. Rowe Price and Morgan Stanley. It was the largest fundraising effort ever for a startup, a venture capital record previously held by DreamWorks Animation SKG for 15 years, based on Thomson Reuters data. Given Morgan Stanley’s recent stake, some analysts think it is on the short list of banks vying to take Groupon public.
“Morgan Stanley is one of the premier firms on Wall Street. An investment would give them an inside track on an IPO,” said Greg Sterling, an analyst and the founder of Sterling Market Intelligence, a research firm.
CNBC first reported Groupon’s meetings with bankers this week.
Groupon, analysts say, may be moving quickly to take advantage of the market’s momentum and the excitement around fast-growing Web companies.
“It’s smart to strike while the iron is hot, and they’re the most visible and fastest-growing player in their market,” Sterling said. “To wait a year would inject a level of uncertainty for the proposition of going public.”
The latest step by Groupon comes during a particularly frenzied period for Web startups. Twitter recently raised $200 million, at a $3.7 billion valuation. LinkedIn, the professional social network, is preparing its own public offering this year, said people with direct knowledge of the matter. LinkedIn is expected to file a prospectus with regulators by the end of the quarter, one person said.
Groupon’s eagerness for a public offer stands in contrast to Facebook, the social networking giant that seems reluctantly headed for an offering in 2012.
This month, Goldman Sachs invested $450 million in Facebook, at a $50 billion valuation. The investment bank is selling another $1.5 billion of Facebook shares to its wealthy clients.
Groupon’s sprint to the public markets matches the speed of its own evolution. In less than three years, the daily deal site has gone from a startup to one of the Web’s fastest-growing company, with more than 50 million users worldwide and annual revenue of more than $1 billion.
Its employee base, now 3,100, has expanded so quickly that the company, which is based in Chicago, had to relocate its staff meetings to a nearby church.
Prediction: this will be the next MySpace. This is just way too over-hyped for what it really is. The potential is so limited when only offering one deal each day in a given market. Furthermore, there’s not a lot in it for the retailer who is showcased. They get a one-time bump in business on which they lose money then have no means to keep those customers coming back for more. Don’t get me wrong, it’s a great idea that has been well executed but something better will certainly come along and leave Groupon in the dust. The stakeholders should take their cake now while on the wave’s crest. They may not get another chance to cash in if they don’t do so now.
exaclty Ron.
We could be wrong – however probabiltiy, at this point, states otherwise. Ask yourself one question? Would Groupon have existed if ther major recession never hit? I would suspect no.
When the markets DO come back – do you think this will stay – history says no.
Also, Groupon’s perception is starting to parallel a gift card….yes the savings are good. However its the instant nature of things that fuels purchases.
Even purchasing something online, you get in 2-4 days…..with a Groupon, it could be 1-2 weeks before you use it, or perhaps even never? Then you amplify the cost in those cases.
Again, similar to Gift Cards.
A larger question – I would like to see use data on these coupons:
When
How fast
How often
Redemption rates etc…..
And in a time series….to adjust for seasonality…….
agreed. how is this possible? who would invest $15B in a company that is immediately and easily mimicked? There is absolutely no barrier to entry for competitors. All Groupon has is its brand, which could never survive a competitor or competitors undercutting it on price. I really think Groupon’s turning down the Google offer will haunt the company. Unless it has some new product idea no one knows about, it will be the next MySpace.
Have you guys even USED Groupon? There is more than one daily deal in different markets.
Anyone in their right mind realizes that this is a scam. Retail merchants, especially in the food and beverage business, can not and will not be able to survive on the Groupon people.
Let me get this correct:
You sell $40 for $20
and then you give 1/2 of that to Groupon.
Which leaves you with $10
Tell you what…I would be more than happy to give anyone $10 for $40 in return.
The numbers do not add up! In any business. The entire process makes no sense.
There are no return customers because they took your money once and got the better of you in the deal.
Groupon is a flash in the pan ….no pun intended.
You do not need the help of Groupon to give money away.
Groupon would definitely exist even without a recession. these arent deals on household goods like broccoli or bleach. this is half off on skydiving, half off at Gibson’s steakhouse, half off on helicopter tours of the Loop. These are deals that people would probably buy even more of when we are out of the recession and there is more disposable income to go around.
The benefit for retailers is that people find out about them and what they do, and then they tell 50 of their friends. It expands awareness. Its essentially advertising. Ive bought from Groupon, and whenever i redeem my coupons (which can be done ANYTIME within a year of purchase) the thing i hear from the businesses i go to is “Tell your Friends!”.
Its advertising, plain and simple. And there are BIG bucks in advertising. Just look at Google and Facebook. They make billions on demographically focused ads.
The company is a fad; if they do go public, it will become a penny stock in two years.
This is definitely all about advertising for. The exposure to Groupon’s expansive email list alone is well worth it for many retailers. It also gives retailers a good chunk of change up front which can come as a benefit in so many ways.
These guys know what they’re doing, no doubt about it. AND they seem to always be steps ahead in terms of ideas. Groupon is the REAL DEAL.
What you all are missing is the redemption rate. THIS is what makes Groupon so successful and worth so much. The retailer needs a 25% redemption rate to break even on his offer. Anything more, and he’s losing revenue. Anything less, and he pockets it. The current average redemption rate for Groupon is around 15%. NOW it makes sense, don’t it.
And those already-sold offers are still out there, valid, for a year… so the redemption rate will continue to climb. So how many billions in un-cashed checks does Groupon have sitting out there… about 85% of their revenue.
If this company is so valuable , why did the State Of Illinois give them $3.5 million in Oct. 2010? Will they give the money back to the state.?
I love it now, but soon, we won’t even be able to buy the deals! It’s giving Americans an imaginary idea of downsizing or saving. when really we’re no where near reallity. We’ll be hurtin when it hits.
@knowsbetter- you could make the same sort of claim about any sort of advertising. how much do companies spend to advertise on TV? or newspapers? those mediums are even less quantifiable. for some its worth it, for others its not. each business needs to decide for themselves whats best for their model. but what Groupon is really offering is exposure.
@josh- its true that there are no barriers to entry, but the fact remains that Groupon has become a household name and the imitators have not. sometimes being first to the party really is all it takes. only history will tell us if turning down Google was a good/bad idea, and I agree 15 billion seems insanely high. but the profits they are bringing in are real.
Man, a golden short opportunity. They don’t come along often enough…..
15 Billion?
@Matt
You can get all of the exposure you want in a variety of vehicles on the net, print, tv, radio. You can not argue the fact that the merchant is giving something (full price) at a 75% discount. The average restaurant that is running at top performance is netting maybe 20-25% ..you do the math. You must work for Groupon…Hopefully your boss will share his windfall with you…my guess is he will not be interested in giving away 75% of his earnings and taking only 25%
Simple mathematics. You can argue all day the marketing aspect and the household “name” but it is a scam and most merchants will eventually figure it out, hopefully before they have to put the for sale sign in the window.
If they take this public anywhere between $6and $15 billion, I would be shorting it out of the gate …
And by all means everyone should put their faith in Goldman Sachs….was that the company that we (taxpayers) bailed out of bankruptcy? That was one of the major concerns in this economic depression..yes depression.
Oh yea ..that’s the one….I would trust them 150% ..not!
The other shoe has yet to drop from Europe…the EURO is dying,they are hiding the other insolvent countries,(Spain, Portugal, Italy, Ireland finally fessed up, France perhaps and let’s see oh maybe a few more… the dollar will continue to slide and there will be a new currency in Europe.
@knowsbetter- yes, since I hold a different opinion, i must work for them. Although I wouldnt mind it. Seems like a nice workplace, hiring in a down economy, with good benefits. I assume you work for a company that has a vested interest in Groupon failing.
You keep using the word “scam”. Is a buy one, get one free coupon in the newspaper also a scam? No one is putting a gun to the business communities head and forcing them to participate. Seems like most are actually pretty eager on their own to sign up. If its not for them, seems pretty easy to ignore the whole thing.
Ask the Joffrey Ballet, who doubled their subscriber base by in one day, if its a scam. If the seats were going empty to begin with, then it dosent matter if its a 75% discount. Its still money they would not have had. And its likely some of those people will like what they see and come back next season at full price.
@Matt
You are correct,no one is holding anyone hostage. Furthermore, buy-one-get one is used by the retail trade to move excess product that may be short on shelf life. (Would you really want a buy one get one on Sushi)??
Some may …to each his own. The bottom line is that restaurants can not continue to use Groupon because the ROI is not there plain and simple.
No repeats, short paying gratuities, etc.
As far as the Joffrey, how many of those 75% discounters will return? at even 1/2 the price?And did they spend $$ on food,beverage,etc? Probably not!
I use the word “scam” because it is by definition. Most restaurants have already realized the mistake this is for their business. The rest will find out the hard way ..after Groupon makes their money. Kinda like buying a used car, breaks down in 1 month and finding out the auto broker is no longer in business.
I signed up for Groupon! So far, they have not provided anything worth anything. ITS ALL HYPE. Someone commented that Groupon will be the next myspace….I doubt it..they will be another pets.com, ethnicgrocer.com ethnicgrocer raised nearly $100MM in venture capital and failed miserably. Pets.com spent over $50MM in venture money in 6 months and went out of business (they were also valued in the billions, look how that turned out)They will be another beyond.com, (beyond raised around $10MM in VC money, then went bankrupt).