What a Deal - Groupon Goes IPO
6/4/2011 by: Darleen Hartley
Groupon, a purveyor of daily deal coupons, is looking to make its own good deal. Groupon has filed for an IPO with the SEC. Now you can own part of the company that profits from partnering with businesses to offer discounts.
The initial public offering (IPO) registered with the Securities Exchange Commission (SEC) that controls stock sales is expected to raise millions for the start up coupon company. Unique in their approach two years ago, Groupon has emerging competition. Their future looked so bright, however, that Google wanted to add them to its stable, but Groupon said "Nay." In response, Google came out with Google Offers mimicking Groupon’s model. Let the games begin. Groupon will trade under the symbol "GRPN" after an exchange is selected. Google goes under GOOG on NASDAQ. It closed at $523.98 Friday.
Buoyed by its 83 million email subscribers as of March 31, Groupon makes money every time someone buys a discount coupon. The business gets the lion’s share of your dollar, but Groupon gets a percentage. For example, Nordstrom Rack, a respected fashion outlet, was offering half price coupons. The site indicated that 10249 had been purchased. At a lowly five percent, that’s a quick $512.45 in Groupon’s pocket, almost enough to buy one share of Google. Multiply the take from that one store times other major and minor companies in most major cities worldwide and Groupon’s sales amounted to $713.3 million last year. Half their users are located in Europe. At the end of March, Groupon reported 56,781 featured merchants.
But don’t run out and buy shares just yet. Further investigation shows on the SEC filing that they had a net loss from operations of $420.3 million. It costs money to make money, they say. Ramping up to 7,000 employees isn’t cheap. Another problem facing Groupon is sustaining their subscribers when a better deal may be offered on another site. The on-line coupon business is rapidly catching on and people looking for a discount will go where they get the most benefit.
Andrew Mason, Groupon founder, said in the SEC filing: "We want the time people spend with Groupon to be memorable. Life is too short to be a boring company. We seek to create experiences for our customers that make today different enough from yesterday to justify getting out of bed. While weighted toward the measurable, our decision-making process also considers what we feel in our gut to be great for our customers and merchants, even if it can't be quantified over a short time horizon."
Groupon offers a Featured Deal, which, similar to eBay sales, expires after a certain time period. The deal shows a countdown clock. A countdown begins now towards the day investors can start scooping up Groupon shares, and to decide if they will put money on Mason’s vague business philosophy.
Groupon, eBay, Andrew Mason, SEC, IPO, Google, Google Offers, Featured Deal, GRPN, GOOG, Securities and Exchange Commission, Wall Street, WS, Stock Market, Market, Nordstrom, Nordstrom Rack,
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