The group-buying website has announced it’s listing its shares on the stock market for the first time, hoping to raise up to $750m in an Initial Public Offering (IPO.) That’s a hell of a lot of money for a discount voucher business that doesn’t make a profit.
It shouldn’t have a problem reaching that target, if LinkedIn’s success has left technology investors clamouring for more. The business social networking site saw shares more than double on the first day of trading, surging to $83 a share when the market opened from an IPO price of $45. It was a remarkably strong start for a technology stock market début, and signalled a return to the days of the dotcom boom more than a decade ago.
Groupon will no doubt be hoping this optimism among tech-savvy investors will continue, but there is a big difference between the two sites – whereas LinkedIn is a profitable company, three-year-old Groupon is yet to make a profit. It brought in revenues of $644.7m in the first three months of this year, but made a net loss of $146.5m after investing heavily in growth overseas.
Nevertheless, its growth has been phenomenal since it was founded in November 2008. Offering discount coupons to members for deals ranging from meals out and beauty treatments to flying lessons, it’s become one of the fastest-growing internet companies in modern times. Revenues rose from $30m in 2009 to $713m in 2010, while the first quarter of 2011 alone brought in sales of $644.7m. But it's been spending at an equally prodigious rate on an aggressive marketing campaign in the US and abroad, although it seems to be working: there are now 83m subscribers to the site globally, up from 150,000 the same time two years ago.
The company turned down an offer from Google for $6bn at the end of last year. At the time critics said the decision was either foolish or brilliant, but it seems that in hindsight Groupon’s choice to dig its heels in was a wise move. Soon after it raised $1bn from institutional investors and analysts have placed its value at a whopping $25bn.
Groupon’s 30-year-old founder Andrew Mason has certainly gone for a quirky approach to entice investors after it goes public. ‘Life is too short to be a boring company,’ he says in the letter to potential stockholders, followed by a statement of the company’s aim: ‘we seek to create experiences for our customers that make today different enough from yesterday to justify getting out of bed.’ A bold claim, but one bound to appeal to investors keen to jump on the fast-growing social media bandwagon.