Sun, Nov 06, 2011 page11

• Groupon shares soar 30 percent on market debut

  DOUBTS: Several analysts said they were skeptical of the company’s long-term viability since it has never turned a profit and it faces a lot of steep competition

  • AFP, NEW YORK
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  Groupon shares jumped more than 30 percent on Wall Street on Friday after the online daily deals sensation raised US$700 million in the biggest initial public offering (IPO) by an Internet company since Google Inc.

  Groupon shares were listed on the NASDAQ market at US$20 and rose as high as US$31.14 in early trading, before closing at US$26.11, a gain of 30.55 percent on the day.

  Groupon, which is trading under the symbol “GRPN,” hailed its success as the second-largest IPO after Google, which reaped US$1.7 billion when it went public in August 2004.

  It was valued at $12.7 billion at the IPO price, despite being dogged by questions in recent months about its accounting methods, business model and failure to turn a profit.

  Groupon, which rejected a US$6 billion takeover offer from Google a year ago, sold 35 million shares of stock at US$20 per share, higher than the initial US$16 to US$18 price range.

  “Our IPO is a small milestone on our journey,” Groupon chief executive Andrew Mason said in a blog post. “With our IPO behind us, I couldn’t be more excited about what lies ahead.”

  Groupon’s stock market debut is being closely watched by investors hungry for technology stocks and market analysts on the lookout for signs of another dot-com bubble.

  There have been several IPOs by Internet firms this year, but the most eagerly awaited are social games giant Zynga Game Network, Inc, which has already filed its papers for an IPO, and Facebook, which has not revealed its plans.

  Career-oriented social network LinkedIn Corp went public in May at US$45 a share and closed at US$82.37 on Friday.

  However, not all technology IPOs have been as successful.

  Pandora shares closed at US$15.22 on Friday, below the June listing price of US$16 for the popular Internet radio site.

  Groupon has enjoyed phenomenal growth since its founding in 2008 — going from 37 employees two years ago to more than 10,400 presently — but its rise has not been without controversy.

  Renaissance Capital, a research company that specializes in IPOs, said Groupon’s long-term success depends on an unproven business model.

  “Regardless of the rapid growth Groupon has used to infatuate potential investors, the company still has yet to turn a profit,” Renaissance Capital said. “Future earnings will largely depend on Groupon’s ability to reduce marketing expenses effectively, while maintaining customer growth.”

  “Additionally, it must withstand rapidly increasing competition in the space, including from large companies such as Google and Amazon,” which, like Groupon, are also offering daily discounts from selected merchants, it said.

  In a blog post, analyst Jon Ogg of the Web site 247WallSt.com echoed some of the concerns expressed by others about Groupon.

  “It has nothing unique in its model other than having a highly paid sales force,” Ogg said.

  “If you were given shares at the IPO, lucky you,” he said. “If not, let’s just say that Groupon is not exactly a suitable investment for widows and orphans.”

  Renaissance Capital said some of the initial investor interest in Groupon might stem from the relatively limited number of shares the company offered — just 5.5 percent of its outstanding shares.

  Virginie Lazes of investment bank Bryan, Garnier & Co said companies generally place 15 percent to 20 percent of their shares in an IPO and Groupon’s debut “has been structured to create an immediate hit.”

  Groupon is present in 175 North American markets and 45 countries and has 142.9 million subscribers. It sold 33 million “Groupons,” or discount coupons, in the third quarter of the year.

  In a filing with the US Securities and Exchange Commission, Groupon reported a net loss of US$308.1 million for the first nine months of the year compared with a loss of US$77.7 million during the same quarter last year.
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