Groupon Continues to Invite Acolytes and Haters
Daily deal company Groupon (NASDAQ:GRPN) went public Friday at $20 a share spiked 40%, momentarily making the company worth $20 billion. Groupon is not the trendiest tech IPO, but it is the most talked about and controversial right now. Groupon has quite a remarkable story of being the fastest growing company in history, turning away a $6 billion bid from Google (NASDAQ:GOOG), then becoming worth three times that huge sum.
Don’t Miss: Groupon Continues Sketchy Practices into IPO
Groupon (NASDAQ:GRPN) has a lot of alluring statistics. Third quarter revenue totaled $430 million, which is 5 times more than a year ago and 100 times above 2009. They are located in 45 countries around the world and 175 cities in North America for a total of 79,000 merchants and 143 million subscribers.
There are however big questions about Groupon’s (NASDAQ:GRPN) future. Its growth rates are slowing considerably. There was a 72% growth rate in the first quarter of 2011, then 33% in the second quarter, and only 10% in the third quarter. To keep maturing, Groupon (NASDAQ:GRPN) needs money from its merchants and subscribers. Groupon’s (NASDAQ:GRPN) prospectus showed this isn’t happening fast enough. Average gross billings per subscriber in Chicago fell to $14 from $22 in the third quarter of 2010 and $61 in 2009.
Moreover, Groupon owed double what it held in cash and there is evidence people are growing tired of the daily-deal. This doesn’t mean Groupon’s (NASDAQ:GRPN) success is over. It just means there is a lot of risk that lies in the details as the stock price rises.
On another interesting note, underwriters manipulated the IPO float so there was more demand than the number of shares available. According to Bloomberg, the result was the smallest float of any Internet IPO in the past decade: only 4.7% of its total shares. That raised $700 million for Groupon (NASDAQ:GRPN), less than the $900 million Groupon (NASDAQ:GRPN) insiders made from selling private shares in January.