London - AFP
Groupon makes its long-awaited Wall Street debut Friday with enthusiasm over technology stocks expected to overcome lingering doubts about the business model of the online daily deals sensation. Renaissance Capital, which specializes in initial public offerings, said the limited number of shares being offered by Groupon could give the company an initial boost on the Nasdaq, where it will trade under the symbol "GRPN." "With shares sold in the IPO representing only five percent of the company's shares outstanding, the stock could trade up after listing because of this favorable supply and demand dynamic," Renaissance Capital said. "However, Groupon's long term success ultimately hinges on the economics of the model, which remain unproven." Virginie Lazes of investment bank Bryan, Garnier & Co said companies generally place 15 percent to 20 percent of their shares in an IPO. "This one has been structured to create an immediate hit," Lazes told AFP. Groupon's debut will be closely watched by technology-stock hungry investors eagerly awaiting IPOs by social games giant Zynga and social networking titan Facebook. Career-oriented social network LinkedIn went public in May at $45 a share and closed at $87.50 on Wall Street on Thursday. Chicago-based Groupon, which rejected a $6 billion takeover offer from Internet giant Google a year ago, is offering 35 million shares priced at $20. Amid strong investor demand, Groupon could offer up to 34.5 million shares and raise as much as $621 million, which would value the company at around $11 billion, significantly lower than previous estimates of over $20 billion. The final listing price for the IPO was set late Thursday, notably higher than the $16 to $18 price previously reported. Groupon has enjoyed phenomenal growth since its founding in 2008 and initially planned to raise up to $750 million from its share offering. But the markets have plunged since June, when Groupon first announced plans to go public, and questions have been raised about the company's business model and accounting methods. Despite its spectacular growth -- the company had 37 employees in June 2009 and now employs more than 10,400 -- Groupon is not yet profitable. "Regardless of the rapid growth Groupon has used to infatuate potential investors, the company still has yet to turn a profit," Renaissance Capital noted. "Future earnings will largely depend on Groupon's ability to reduce marketing expenses effectively while maintaining customer growth. "Additionally, it must withstand rapidly increasing competition in the space, including from large companies such as Google and Amazon," it said. In a filing with the US Securities and Exchange Commission, Groupon reported a net loss of $308.1 million for the first nine months of the year on revenue that soared to $1.1 billion from $140.7 million in the same period a year ago. Groupon is present in 175 North American markets and 45 countries and has 142.9 million subscribers. It sold 33 million "Groupons," or discount coupons, in the third quarter of the year.