Groupon announced plans on Thursday to go public to raise as much as US$750 million, but the mixed financial picture painted in the filing by the online daily deals sensation could temper investor enthusiasm.
Groupon, in the filing for an initial public offering with the US Securities and Exchange Commission (SEC), did not provide the number of shares being offered or a date for the listing on Wall Street.
The Chicago-based Groupon, which reportedly turned down a US$6 billion takeover offer from Google last year, said that it plans to trade under the ticker symbol “GRPN,” but did not say on which exchange.
Groupon, which has enjoyed phenomenal growth selling discount coupons online since it was founded in November 2008, reported a net loss of US$102.7 million for the first quarter of this year on revenue of US$644.7 million.
Groupon lost US$456.32 million last year on revenue of US$713.4 million and spent US$179.9 million on online marketing in the first quarter of this year.
While analysts were impressed by the revenue growth they expressed concerns about the money Groupon is spending and competition from rivals such as Living Social, Facebook and Google, which are also offering online local deals.
Forrester Research analyst Sucharita Mulpuru said the revenue numbers reported by Groupon were “lower than everybody had speculated” and questioned how much of the company’s growth had been “bought.”
“It’s hardly been what you would characterize as organic growth,” she said. “They’ve spent a lot of money on getting the business to this size.”
Recalling that Groupon recently raised nearly a billion dollars from its backers, Mulpuru added that “their burn rate is very high.”
“Their burn rate smells of 1999,” she said in a reference to the dot-com boom.
“That said, the hope is that they end up with a story that is closer to Amazon than Webvan,” she said in a reference to a grocery delivery business that was a dot-com casualty. “Obviously, Amazon too bled money for many years.”
Bill Buhr of Morningstar said the biggest concern is that Groupon’s business is “very replicable.”
“It doesn’t seem to have anything that locks out competition,” Buhr said. “Customers are loyal to the best deals, not to the provider of the deal.”
In its SEC filing, Groupon said it had 83.1 million subscribers to its online discounts as of March 31 and employed more than 7,000 people.
It has expanded from five North American markets in June 2009 to the current 175 North American markets and 43 countries.
In a letter to prospective investors accompanying the SEC filing, Groupon founder Andrew Mason did not attempt to hide the risks and said investors may need to exercise patience.
“We spend a lot of money acquiring new subscribers because we can measure the return and believe in the long-term value of the marketplace we’re creating,” he said. “When we see opportunities to invest in long-term growth, expect that we will pursue them regardless of certain short-term consequences.”
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