About 5 Percent of Groupon Shares Will be Sold during Nov. 4 IPO

By Ed Silverstein October 24, 2011

Groupon Inc. is scheduled to hold an initial public offering on Nov. 4 with about 5 percent of its shares being available to investors at that time, according to news reports.

The Wall Street Journal reports Groupon’s latest value is $11.4 billion, based on company filings. It had been valued earlier at $20 billion, The Journal adds.

The company will sell only 5.4 percent of its shares next month, The Journal said.

An online coupon site, Groupon plans to use the money from the IPO for “working capital,” “potential acquisitions” and other uses, according to TechZone360.

In its analysis of the IPO, The Journal says that by offering only a small percentage of stock a company “can increase trading volatility once the stock debuts. A small offering can also turn off large institutional investors, who seek highly-liquid stocks to trade.”

In addition, Dealogic reported that “nine out of 10 U.S. IPOs over $100 million are done with sales of more than 15 percent of a company's stock … with the majority done at between 15 percent to 35 percent,” The Journal said.

Groupon hopes to raise $621 million in the IPO. Earlier this year, Groupon wanted to raise $1 billion from the IPO, The Journal said.

In a related matter, The Journal reports that Google had tried to purchase Groupon last December for $6 billion, The Journal said. The deal fell apart.

In a related matter, Bloomberg News reports that the valuation of Groupon may “need to drop to as low as $3 billion to $5 billion to entice shareholders” comments Josef Schuster, founder of IPOX Schuster LLC. He told Bloomberg the company is in “turmoil.” Bloomberg claims Groupon has “unusual accounting practices, rising marketing costs and the loss of two chief operating officers in six months.”

Ed Silverstein is a TechZone360 contributor. To read more of his articles, please visit his columnist page.

Edited by Rich Steeves

TechZone360 Contributor

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