Groupon IPO Raises $700 million (GBP437m)

Groupon logo behind a screen, green, people in foregroundYet another huge tech stock IPO was launched today. Groupon, the website business that provides coupons, money off vouchers and other offers, floated on the NASDAQ today.

Shares were thought to start trading at between $16 and $18 a share but actually floated at $20.00 each. By 12.46pm EDT shares had reached $29 on the NASDAQ, an increase of 45%. This values Groupon at around $12.7 billion which means that it is the second largest Internet business at the time of its initial public offering. In April 2010 Groupon was valued at $1.35 billion (reported by Forbes).

When Google floated in 2004 their initial valuation was $23.1 billion. Yandex, who floated in May, were valued at $8 billion on floatation.

So far Groupon have only released 5% of its shares (35 million) which puts its shares in high demand. However, some analysts such as Rob Romero from Connective Capital Management believe that Groupon is over-priced at the moment (as reported in Reuters). However, tech stocks are still considered to be excellent choices for their potential for growth and many fund managers are in need of fresh tech stocks to balance their portfolios.

Chief Executive Officer Andrew Mason and Chairman Eric Lefkofsky rang the opening bell on the Nasdaq today and were seen celebrating in Times Square afterwards. Andrew Mason and Eric Lefkofsky invested $1 million initially in the business to develop the web platform and market and develop the business model.

What do Groupon do?

Groupon is the deals specialist. They are essentially a “deal-of-the-day website” which provides its customers with opportunities to get money off and discounts on a variety of products and services. They make their money through affiliate relationships with merchants and generally take a commission on all sales.

It is free to sign up to Groupon so users (the clients) receive daily emails regarding discounts on products that they have declared an interest in. Really it is like having a personal shopper who looks for bargains and then tells you about them. In 2010 Forbes reported that Groupon had 13 million members.

Tech Stock Markets

Earlier this year LinkedIn floated with an IPO valued at around $750 million. The tech stock analysts are still eagerly awaiting news from Twitter, Zynga and Facebook, all of which are expected to float in the not too distant future. The latest news from Facebook is that although Mark Zuckerberg is not in a rush to float there could be an IPO as soon as Autumn 2012.

Although Groupon saw a 45% increase today the rest of the stock market was in decline. LinkedIn was a noticable loser today with share price down by 7.43% at 1.07pm EDT. Overall the Nasdaq is down by 0.85% so far today.

As far as Groupon is concerned the big challenge is going to be when (or if?) Google launches its own service – Google Offers. This will be a coupon service similar in nature to Groupon. Google’s main strength is in providing contextual and personalised / interest based advertising for its users and its Adsense publishers. This means that it can reach a vast number of Internet users without actually requiring people to subscribe the service. If Google develop a service as good as Groupon then they could quickly steal a large market share. Shareholders should consider this carefully. See Google’s blog post More local deals, personalized to your interests to learn more about their service, Currently Google Offers is in “beta” and only available in the USA.

Google was developing Google Coupon Feeds which aimed to provide discounts within its search results pages, however, according to Google.com this was integrated into Google Places.

Get the lastest on Groupon from Google finance: www.google.com/finance?q=NASDAQ:GRPN

 

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