It is being reported that Groupon has reduced the size of their offering to $500 million to $700 million and that the valuation will be set at less than $12.5 billion.
Groupon Discounts IPO
By RANDALL SMITH And SHAYNDI RAICE
Wall Street Journal
October 19, 2011, 8:14 P.M. ET
Groupon Inc. plans an initial public offering of less than 10% of the discount deal company at a valuation of less than $12.5 billion in the wake of recent market volatility and the company's missteps, according to people familiar with the deal.
The size of the sale, expected to be completed in the next two weeks, could be $500 million to $700 million under plans to be disclosed in advance of the company's roadshow beginning in the next few days, the people said. The size is meant to cut the amount of stock being sold at what may be a knock-down valuation, in hopes that more shares can be sold later at higher prices.
Although valuations of $15 billion to $20 billion were bandied about ahead of and when the company filed its plans to go public in June, the current goal of less reflects the reality that the IPO window was closed for nearly two months between mid-August and mid-October because of overall stock-market weakness, and missteps by the company itself.
Groupon in August was forced by regulators to pull an unusual accounting metric called "adjusted consolidated segment operating income" from its offering materials. In late September, it had to cut its reported revenue in half to satisfy questions from the Securities and Exchange Commission. Its chief operating officer also departed last month.
One person familiar with the matter said that the company has decided to sell less stock because of the market volatility. The company has decided to sell a smaller number of shares because it's better to sell some shares now, rather than cancel the IPO and losing out on any fundraising opportunity, the person said.
The move represents an increasingly common approach among recently public Internet companies, like Zillow Inc. and LinkedIn Corp., which both sold a relatively limited number of shares of their stock in public offerings this year. By meeting investor demand with a small flotation, companies can see their stocks pop on the first day of trading.
Zillow, which went public in July, offered 3.5 million shares—about 13% of its total shares outstanding—for trade. Though there was clearly great demand for the IPO—the stock priced above the expected range of $16 to $18 a share, even after that level was boosted by $4—the company didn't add more shares to its deal.
LinkedIn, which has said it will likely become unprofitable this year, in May went public by selling only 7.8 million shares of its stock—or 9% of shares outstanding—and gained 109% during its debut.
Write to Randall Smith at randall.smith@wsj.com
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