Groupon Plans in Flux

IPO? Groupon Plans in Flux

Groupon is a deal of the day website that features discounted gift certificates usable at local or national companies. Groupon was launched November 2008 in Chicago. As of October 2010, Groupon serves more than 150 markets in North America and 100 markets in Europe, Asia and South America and has amassed 35 million registered users.  The company offers one Groupon per day in each of the markets it serves. So, for example, a $40 Pilates class could be purchased by the consumer for $20 and then Groupon and the retailer would split the $20. That is, the retailer gives a class valued at $40 and gets approximately $10 from Groupon for it. And the consumer gets the class, from the retailer for which they have paid $10 to Groupon.

The Wall Street journal says that Groupon, Inc. has been added to the list of hot new Web companies having second thoughts about whether now is a good time to go public. Groupon was expected to fetch a $20 billion valuation upon its stock market debut cancel its investor road show and is reevaluating plans for the initial public offering in the face of stock market volatility. The article states that Groupon is not pulling it’s IPO it is just reassessing the timing. Groupon was originally going to go public after Labor Day and price its shares in mid September. The article talks about in recent weeks the IPO rush has been beset by sock-market volatility and growing investor questions about the sustainability of some of the Web businesses. Wall Street Journal says that the drop in the market has gotten everyone running scared. The article states that when Groupon filed to go public in June, it attracted criticism for its high marketing cost and unprofitable business. The Sec (Securities and Exchange Commission) requested that Groupon remove an unusual accounting metric, dubbed Adjusted Consolidated Segment Operating Income, which painted a more robust picture of its performance. Many investors say the SEC scrutiny was likely a major factor in delaying the Groupon IPO. A spokesperson for Groupon said that this was not the reason they are putting the IPO on hold. Giving the recent fluctuations in the stock market they have decided to wait.