Groupon scales back IPO, now looking to raise $540 million

By Trevor Mogg October 21, 2011

Daily deals site Groupon is hoping to raise somewhere in the region of $500 million in its upcoming IPO. Back in June it was talking of raising $750 million. The latest, more modest figure has been put down to a number of factors, including volatile market conditions and the departure of two chief operating officers this year.

According to a regulatory filing on Friday, Groupon plans to sell 30 million shares – equal to less than 5 percent of the company – for $16 to $18 each. If it shifted all of them at the top price, the IPO would raise $540 million. At the least it would raise $480 million.

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This would value the company at between $10.1 billion and $11.4 billion, which, as Reuters points out, is significantly lower than an earlier valuation of $20 billion, but still more than the $6 billion Google put up for it in December last year. Groupon declined Google’s offer.

The scaled back valuation may still prove unattractive to investors when the sale of shares goes ahead next month, with many seeing the relatively young daily deals business as a highly competitive and unpredictable area. The daily deals market has expanded rapidly since Groupon started three years ago. A ton of competitors have appeared, including big-hitters like Amazon and Google, pushing the business to saturation point.

Speaking to Reuters, Josef Schuster, founder of Chicago-based IPO research and investment house IPOX Schuster, said: “This offer strikes me as very, very unattractive. I think it’s over-valued.”

However, third-quarter results published Friday showed that the Chicago-based company had increased revenue by 10 percent on the previous quarter and reduced operating losses.

Groupon will launch its IPO roadshow next week in an attempt to attract investors, with chief executive Andrew Mason, chief financial officer Jason Child and product head Jeff Holden at the helm.

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LivingSocial pairs real-time discounts with room service and delivery options

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LivingSocial continues to breathe down Groupon’s neck as it paves its own way through the daily deals business. While the coupon curator definitely takes cues from Groupon’s success and mistakes, it’s also injecting its own flavor into new site features, including its new Instant service.
LivingSocial Instant is the site’s take on Groupon Now, which gives Groupon users real-time deals based on their location that you can buy and redeem on the go—and better yet, which give automatically reimburse you if you aren’t able to use them within the allotted time period.
But Instant has some new features that differentiate it from Groupon Now. Instead of making immediate plans to eat somewhere based on your location, Instant lets you order meals from a restaurant offering a discount so your meal will be ready right when you arrive to take home. There’s also an option for delivery as well as dine-in specials.
Part of the delivery feature is Room Service, an option to inject a little high class in your experience. Basically, Room Service brings not only the food but the restaurant to you, with table, glassware, and top-notch presentation and food to boot. It will be available on Thursday and Friday nights.
At the moment, these features are only up and running in the Washington, D.C. area, home to LivingSocial headquarters.
While Groupon seems to have clung to its bargain bin roots (perhaps with the exception of some of its Groupon Getaways), LivingSocial appears to be taking a note out of Gilt Groupe’s book. The site hasn’t gone full scale upper crust, but it’s clearly trying to embrace the idea of enjoying the finer things in life, and a good part of its Instant service is tailored to this. And dining has been one of the most popular discount items for daily deals sites, so this could easily be a popular feature for for the site.
No word on when the ritzy services are heading to you—we’ll keep you posted.

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Groupon sues two former employees who left for Google Offers

Groupon has sued two former employees who last month joined one of its direct competitors, according to papers filed in an Illinois court on Monday. Groupon claims the pair took with them confidential information belonging to the company.
Bloomberg reports that Michael Nolan, who was at Groupon for two years, and Brian Hanna, who started working there at the beginning of this year, left the daily deals company in September for positions with Google Offers. The pair worked as sales managers for Groupon.
The daily deals company also claims that they have breached an agreement whereby they wouldn’t work for a direct competitor for the next two years.
The filing says that “in their new positions with Google Offers and/or Google, Hanna and Nolan will provide the same or similar services as they provided at Groupon,” which means they’ll have to “employ confidential and proprietary information that they learned while employed at Groupon.”
Groupon is attempting to get a court order to prevent Hanna and Nolan from disclosing any confidential information which belongs to the company.
The news comes on the same day that Groupon’s IPO roadshow kicks off in an effort to generate investor interest in its stock. The Chicago-based company hopes to sell 30 million shares for between $16 and $18 in an effort to raise as much as $540 million. This would value Groupon at $11.4 billion. Late last year, Google offered to buy Groupon for $6 billion but the bid was rejected. Less than six months later, Google launched its own daily deals service, Google Offers.
The daily deals business has boomed since Groupon launched in 2008, and has already reached saturation point. Many competing companies have fallen by the wayside in recent months, while Google Offers continues to expand. It currently offers daily deals in more than 12 US cities, with launches for 25 more cities planned for the near future.
While Google Offers may not be as big as Groupon just yet, the original daily deals company is nevertheless keen to keep ahead of the game and ensure that none of its former employees share any information relating to its business practises, although it may, of course, be too late.

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Groupon IPO may not be so rosy, after all

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When daily deals operator Groupon filed for its initial public stock offering back in June, looking to raise about $175 million in operating capital, some industry watchers were valuing the company in the $20 to $25 billion range. However, in the intervening weeks, some of the luster seems to have worn off the company: Groupon was forced to admit that it's not actually making any money, and now the company's valuation is dropping fast, with the Wall Street Journal quoting IPO analysts (subscription required) that the company's value is more likely in the $5 to $10 billion range.

The valuation decline is the latest stumble for the daily deals pioneer, which was also forced to restate its reported revenues after the Security and Exchange Commission objected to its accounting methods. Groupon had been reporting its revenue as all the monies it received from customers; the SEC required the firm to restate its revenue as everything it received from customers after merchant fees had been paid.