Nov 4, 2011

Posted by in IPO | 0 Comments

GRPN IPO Launched

Time for Groupon (GRPN)

GRPNGroupon (GRPN), is the operator of a popular group buying website. Groupon has been watched closely for several months now and it’s finally the time to go public. Groupon (GRPN) is expected to be the most exposed new issue of this year and will be listing shares on the NASDAQ this week. The plan is to offer 30 million shares from $16 to $18 per share. This deal would make the company worth more than $11.2 billion. The front book runners on the offering are Goldman Sachs (GS), Morgan Stanley (MS), and Credit Suisse (CS).

Who and What is Groupon (GRPN)?

Customers using Groupon (GRPN) are able to purchase services and goods at a 50-90% discount from merchants that are local to them. Merchants in 175 North American markets and 43 countries are a part of Groupon (GRPN). Daily emails with deals called “Groupons” are sent out to the 143 million subscribers. One example of a common Groupon is the customer pays $20, which can be used for $40 worth of food at a restaurant. Majority of the purchase price goes to the business and Groupon (GRNP) retains 30-40% as profit. The growth of Groupon (GRPN) has allowed the company to extend their services and products such as events and concerts (Groupon Live), consumer products (Groupon Goods), and travel (Groupon Getaways). A new feature is Groupon NOW, which gives businesses an opportunity to offer discounts instantly during slower hours and can be viewed on mobile devices.

Groupon (GRPN) Financials

The rapid growth in the third quarter generated $1.2 billion in revenue. Groupon (GRPN) was able to break even in the quarter since it had been unprofitable from the start up. That’s all thanks to a sharp decrease in marketing expenses. Since, growth has slowed. Third quarter sequential revenue growth of 10 percent, down from 33 percent in the second quarter. Groupon (GRPN) saw the chance in the number of Groupons sold, which was about even from the second quarter to the third quarter. Adding higher-value Groupons fueled the profit growth.

What are the GRPN Risks?

Although Groupon has had rapid growth, which makes potential investors interested, Groupon (GRPN) still has not turned a profit. The ability Groupon has to lower marketing expenses while keeping customer growth will affect future earnings. Groupon has a tough task ahead since it must hold up to their competition with Google (GOOG) and Amazon (AMZN), both of which are increasing quickly. Along with all of this, Groupon (GRPN) needs to continue to add local merchants and offering subscribers the great deals that made them known in order to keep their position as leader in he local deals market.

How is Groupon (GRPN) being received?

There have been mixed reactions in the media coverage. Both the concerns and praises for Groupon (GRPN) are understandable and valid. Investors will have the chance to see a new business model in a growing market with exciting growth, but there are still a lot of concerns about managing the expenses and if they are able to get more customers to sign up. The IPO shares sold only account for 5% of the shares outstanding. Supply and demand may cause the stock to only trade up after the listing. Long-term success depends on the financial side of the business model, which is still unknown.

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