Categorized | IPO

Status of Groupon IPO

The Groupon IPO Has Been Delayed

Groupon IPOThe Groupon IPO was highly anticipated to be the biggest Initial Public Offering (IPO) of 2011.  Originally scheduled to occur in the early fall of 2011, the Groupon IPO has been delayed for two primary reasons:  the summer 2011 stock market crash and an United States Securities and Exchange Commission (SEC) investigation into statements made by the company during the pre-IPO quiet period.

Groupon is an Internet company that offers daily deals to people who visit their website or sign up to receive email alerts.  The daily deals model has become a popular marketing tactic used by local merchants trying to reach Internet savvy customers that are looking for bargains.  Groupon has network of approximately 57,000 local merchants that market to 83 million subscribers.

Groupon announced in June2011 that they intend to raise up to $750 million in an IPO that Wall Street analysts said could value the company at $20 Billion.  They started their IPO road show in the summer of 2011 to sell their IPO to a highly receptive investment community that was looking to get into the next hot Internet IPO.  However, after the stock market lost more than 15% its value in August of 2011, as the European debt crisis boiled over and ominous signs of a possible approaching recession in theUnited Statesbegan to appear, Groupon cancelled its road show and postponed its IPO.

The Groupon IPO has been saddled with mistakes since they filed their offer to sell shares to the public in June 2011.  Wall Street initially reacted skeptically to the Groupon IPO filing because the filing revealed that the company was not profitable and had marketing costs that were higher than anticipated.  A request was made by the SEC to Groupon to remove an accounting measure included in the  Groupon IPO filing called “Adjusted Consolidated Segment Operating Income”.  This request was made because it is not an accounting measure that is usually utilized by public companies in their earnings reports and it provided a view of Groupon’s performance that was better than what would have been provided by standard accounting measures.

Groupon’s CEO Andrew Mason also made a mistake when sent an internal memo touting the company’s performance and its competitive advantage to Groupon employees, which is something company insiders are supposed to refrain from doing during the IPO process.  The internal memo was leaked to the Wall Street investment community, which raised questions about whether Groupon’s insiders had violated the SEC quiet period rule that applies to companies in the process of going public.

How To Play The Groupon IPO

It is important to note that the Groupon IPO has been delayed, not cancelled.  Although nobody knows when or even if the Groupon IPO will actually occur, current speculation is that the Groupon IPO will occur when market conditions improve.

Groupon is in the hot daily deals Internet space, which makes participating directly in the Groupon IPO nearly impossible for individual investors; however, this does not mean that individual investors cannot benefit from the Groupon IPO.  There are a number of publicly traded stocks that to some extent or another that have exposure to the daily deals Internet space.  Individual investors can buy these stocks in anticipation of the Groupon IPO, since other companies in the daily deals Internet space will likely benefit from the coattails effect that the Groupon IPO could have on stocks in the daily deals Internet space.  Stocks in the daily deals Internet space that could have a positive price impact from the Groupon IPO include: (Nasdaq: PCLN), an online travel company that provides travel services on a worldwide basis; OpenTable, Inc. (Nasdaq: OPEN), an online restaurant reservation service that operates in the United States, Canada, Mexico, Europe, and Asia; Travelzoo Inc (Nasdaq: TZOO), an Internet media company that publishes travel and entertainment deals from travel and entertainment companies in North America and Europe; Corp. (Nasdaq: LOCM), a local Internet search advertising company operating in the United States and United Kingdom that offers daily deals from local merchants.

The Groupon IPO is being co-managed by the elite Wall Street investment firms Goldman Sachs and Morgan Stanley.  High net worth investors connected to the firms will be provided shares in the Groupon IPO, which will likely leave individual investors out in the cold.  However, by identifying the right stocks to invest in before the Groupon IPO occurs, individual investors may be able to profit from the coattails effect that is likely to accompany Groupon IPO

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