Friday, October 21, 2011

Groupon Nears IPO as it Prices at $16-$18 - Roadshow Next

It was a big mistake for Groupon and Zynga not to file for their IPOs this spring when the fire was hot for these names.  The valuation talked about even in early summer upon IPO for Groupon was $30B - now we're talking just over $10B.  [Jun 3, 2011: Groupon Files IPO Papers with Potential $30B Valuation]  While I still expect a ton of hype, the aura around Groupon in particular has waned a bit.  There has been some fighting with the SEC on how to account for revenues - Groupon has given in on that.  And I think at some point there will be 'coupon' fatigue.  But I'd still expect a huge first day pop.  The IPO should be coming very soon.

  • Groupon reported nearly breaking even in its third quarter, an important milestone as it prepares the final leg of its long journey toward an initial public offering.  On Friday, the daily deals giant published the expected price range of its initial offering in a revised prospectus. Groupon expects to sell 30 million shares and fetch $16 to $18 a share, valuing the company at as much as $11.4 billion.
  • Groupon is also seeking to quell questions about its business model, disclosing that it had narrowed its losses in the third quarter, to $1.7 million in consolidated segment operating income. Using that same metric, the company turned a profit in its core North American business, earning $18.8 million, with the losses mainly coming from mainly the international businesses.
  • Friday's revision was filed as Groupon and its cadre of bankers prepare for a two-week roadshow with potential investors, hoping to tap into long-simmering excitement over the company's forthcoming I.P.O. The company had been especially keen to prove that it was at least close to profitable before it began its road show, according to people briefed on the matter.
  • The site now has 142.9 million subscribers, according to its latest filing, a sevenfold increase from last year. As of the third quarter, about 29.5 million of those people had purchased at least one deal.
  • Yet soon after the company filed its first prospectus, it had attracted harsh scrutiny from skeptics of its business model, as well as accounting that critics said gave a misleading impression of profitability. Groupon has had to amend its prospectus several times, including to restate its revenues and to remove a controversial financial metric.
  • Though Groupon's growth has slowed as it has grown larger and more diversified-- its net revenue grew only 9.6 percent over last quarter, to $430.2 million -- the company disclosed in its latest filing that it is still attracting new subscribers and converting them into paying customers.
  • As it readies itself for potentially tough questioning from investors, Groupon's highest priority has been to show that its business and growth are sustainable. In Friday's prospectus, the company said that the amount of coupons sold per customer had grown roughly 22 percent year-over-year, to about 4.2. And the company's average revenue per deal had grown about 31 percent over the same time last year, as well as about 7 percent over the second quarter.
  • Meanwhile, the company also trimmed what has been one of its biggest expenses: online marketing aimed at luring in new customers. Groupon trimmed that spending to $181.1 million in the third quarter, after spending $432 million for the first half of the year, continuing what Mr. Mason had promised would eventually be a significant cutback in marketing expenses.
  • Over the past year, Groupon has rolled out new offerings that expand its business beyond daily deals, including travel packages and ticketed events. Those new products have diversified the company's operations, though they often carry lower profit margins that have weighed on sales growth.
  • Revenue per subscriber fell 15 percent to $3.3 in the third quarter, from the previous quarter, and the company's deal margin, or revenue divided by gross billings shrank.

[Feb 26, 2011: Groupon Revenue Hits $760M in 2010; Staggering Year over Year Growth]
[Dec 31, 2010: NYT Dealbook - New Round of Financing for Groupon Sets Stage for Late 2011 IPO]

No position

Disclaimer: The opinions listed on this blog are for educational purpose only. You should do your own research before making any decisions.
This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.

Copyright @2012