Groupon just offered a discount on ... its own stock. Its valuation, once soaring into the stratosphere at $20 billion -- even higher -- is now going cheap. The IPO may be well in the $11 billion range. That's half off, guys -- get it while you can! This daily deal ain't gonna last too long!
For its early private investors, it's a great investment. Accel Partners and New Enterprise Associates invested at a $250 million valuation. A return of 40 times in a little over two years is not too shabby at all. Its later investors, Battery Ventures and Digital Sky Technologies, who invested anywhere from $1.4 billion to $4.7 billion valuations could end up with 2 to 6 times the returns in about two years. No complaints there!
Let's look at this daily deal closely. The company's S1 filings start with a letter from the founder, Andrew Mason, who tries hard to take a Google/Warren Buffet-like approach to public offering communications. "Life is too short to be a boring company," he says. As we delve deeper in the 256-page S1 filing, we find some interesting data points:
So in a nutshell, you have fickle customers, who buy a Groupon once every six to nine months, and no way to track if merchants had a meaningful ROI. We can just move on to the next merchant, or the next town or the next country. Merchants in other parts of the world are eager to hear from this 3-year-old company. More than half of its 2011 revenues are from international operations.
What matters in any business in the long run is the substantial value it can create for its customers. Apple's customers rave about the company and beat a path to its door, again and again? Oh well, guess that sounds a bit old-fashioned to a 3-year-old!
The stock offering at $17 may be a steal and promises a nice bump. Alan Patricof, managing director of venture firm Greycroft Partners, recently remarked here that the Groupon roadshow may be a circus. And creating a $11 billion value in three years is no mean feat -- the company is the new darling of the Web 3.0 age.
But like most Groupons for a tanning salon, a promise to make my teeth whiter or food at a local joint that I never wanted to visit in the first place, I will pass on this great IPO once-in-a-lifetime deal.
Follow Mahendra Ramsinghani on Twitter: www.twitter.com/mahendra_gr