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Groupon shares zoom 31 per cent as investors pile into daily deals company


By Noel Young, Correspondent

November 4, 2011 | 3 min read

Shares in daily deals site Groupon zoomed 40 per cent to $28 in early trading on NASDAQ yesterday although they finished lower at $26.11. Just a day earlier the company had increased the price of the shares in its IPO to $20 - " a very expensive lottery ticket" in the words of one commentator - but it had no trouble selling them. It stopped taking orders from investors a day earlier than planned because of high demand.

Groupon shares zoom

The closing price, up 31% on the $20 IPO price, valued Groupon at $16.7 billion, making it more valuable than companies such as Adobe Systems and nearly the size of Yahoo. It was worth more than companies such as Whole Foods Market and Xerox.

At the last minute, the Chicago-based company had raised the price of the 35 million shares in the initial public offering to $20 each, raising a total of $700 million . Two weeks ago Groupon had set a range of of $16 to $18 a share .

The $20 price, valuing Groupon at nearly $13 billion, made it the second-highest IPO total in tech history. Google had a valuation of $23.1 billion when it went public in 2004.

The higher price was "a sign of investor appetite for Groupon," said the Wall Street Journal. The $16.7 billion valuation based on the closing price is still well below the figure suggested a few months ago. Then the figure of $30 billion was bandied about - and Groupon notoriously rebuffed Google's $6 billion bid to buy it outright.

Underwriters had said they were were aiming for a modest first-day price gain - between 15% and 40%. They wanted to avoid the price doubling, which happened with LinkedIn in May. Its share price zoomed 109% on its first day of trading, peaking at $122. Yesterday they were $79.60.

The significant first-day rise in Groupon's stock price means the IPO will be remembered as a success, said one expert.

Groupon has had a bumpy ride to going public since filing to do so in June. The viability of its business model has been questioned and there were concerns from federal regulators over its accounting practices.

Some analysts, said the WSJ, including Morningstar, had valued Groupon at as little as $5 billion. Ken Sena, an analyst with Evercore Partners, valued Groupon at between $8 billion and $10 billion.

"This stock is very much like a lottery ticket," Espen Robak, president of New York-based Pluris Valuation Advisors, was quoted as saying. "You could argue it's a very expensive lottery ticket."

Groupon founder and CEO Andrew Mason was ebullient at the successful launch. In a blog post, he thanked investors, employees and customers

celebrating what he called "a small milestone on our journey".

"With our IPO behind us, I couldn't be more excited about what lies ahead," he wrote.

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