Friday, December 31, 2010

NYT Dealbook: New Round of Financing for Groupon Sets Stage for Late 2011 IPO

Whatever the valuation the story of Groupon is just amazing; this company was not even in existence 10 quarters ago... and now has turned down a deal to be bought by Google for $6 Billion.  [Nov 30, 2010:  From Startup in 2008 to Potential $5-$6B Buyout from Google in 2010]   Just as awe inspiring is revenue over $1B... in 2 years... incredible.  Judging by the valuation the rabid "It's 1999 all over again, just replace Alan with Ben" investors have placed on the Youku's of the world (which in a word is cuckoo!), Groupon might be worth $20 billion.  [Dec 13, 2010: Careful About that Youku on Your Shoe] Not saying this is a sensible valuation, but with easy money flying out of every orifice and a major dearth of high growth companies in our country, any visible rapid growers are going to attract mounds of money.  In Youku terms Facebook should be worth more than Apple + Exxon combined...

And if you are wondering, I asked around if I would have any chance to be part of this sort of financing (which I would be very interested in getting in) and I could tell from the laughter meant no.   If you are not one of the kingpins you can forget it.

Via NYT:
  • The 30-year-old founder and chief executive of Groupon, Andrew Mason, could raise as much as $950 million from investors in the next few weeks, laying the groundwork for a multibillion-dollar initial public offering in 2011.
  • The social buying site, which offers coupons for local businesses, has so far locked up $500 million in fresh capital from Fidelity Investments, Morgan Stanley, T. Rowe Price, and other large investors — allowing Mr. Mason and eight other directors to take a significant amount of cash off the table.  In the coming weeks, the company could bring in another $450 million, according to a Securities and Exchange Commission filing on Thursday.
  • If successful, Groupon’s latest fund-raising effort would be the largest ever for a start-up (if?)
  • On Dec. 20, Groupon hired its first chief financial officer, Jason Child, a former executive. By Thursday, Fidelity, T. Rowe Price, Morgan Stanley, and others had committed $500 million.
  •  Meanwhile, Groupon, with revenue above $1 billion, continues to grow at a breakneck pace. In the last month, the site’s subscriber base has jumped 42.3 percent to more than more than 50 million worldwide, the company said.
  • Groupon could be rushing its debut, in part, to cement its dominance in the online advertising market. While Groupon is the 800-pound gorilla, it is a highly competitive space that has spawned scores of clones that are becoming viable threats. The No. 2 player, LivingSocial, has more than 10 million subscribers and recently raised $175 million from Amazon.  For now, Groupon has first-mover advantage. But that edge can quickly evaporate as Friendster and MySpace learned when Facebook entered the social media fray years ago.
  • “If they raise all this money privately and then become the first to go public in this space, they will become the de facto winner,” said Peter Falvey, co-head of technology investment banking for Morgan Keegan. “They have a good lead, but the idea is to go for the knockout punch — an I.P.O. would be a huge branding event.”
  • For Groupon’s new class of investors, it is all about that eventual payday. By jumping in now, T. Rowe Price, Fidelity and Morgan Stanley get an opportunity to peer into the company’s books and more important, get in before the public offering so the potential for a windfall is greater.
 No positions

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