Groupon shares drop on concern about merchants future involvement

CHICAGO ― Groupon Inc. shares fell more than 7 percent on Tuesday on concern merchants may not run a lot more of the company’s daily deals in coming months.

Susquehanna Financial Group and daily deal industry tracking firm Yipit surveyed almost 400 merchants recently about their experiences running daily deals with Groupon, LivingSocial and other providers.

An average of eight out of 10 merchants enjoyed working with daily deal companies, the survey found.

However, it also found that 52 percent of the surveyed merchants are currently not planning to feature deals in the next six months. Nearly 24 percent of the merchants intend to feature only one deal in the next six months, the poll also found.

Groupon shares were down 7.6 percent at $19.06 during midday trading on Tuesday, below the company’s initial public offering price of $20.

Last year, Groupon completed one of the largest Internet IPOs since Google’s debut, but the company’s business model has been questioned by some analysts.

A crucial part of the company’s business involves persuading merchants to run deals and accept the large discounts that are integral to the offers.

“Our proprietary merchant survey highlights concerns of the daily deal sites and early read implies lower usage over the next six months, despite some surprisingly high satisfaction rates,” Herman Leung, an analyst at Susquehanna, wrote in a research note detailing the survey results.

Groupon and LivingSocial recently unveiled instant deals, which are location-based offers that are usually run by merchants for a few hours only.

The survey by Susquehanna and Yipit found that only 10 percent of merchants polled have considered running an instant deal with Groupon or LivingSocial.

Groupon sells 500 percent more holiday deals over last year’s time

CHICAGO ― Groupon Inc’s. shares rose more than 6 percent on Wednesday after CEO Andrew Mason emerged from the company’s post-IPO quiet period to share holiday sales numbers.

Groupon sold more than 650,000 holiday deals between Black Friday and Cyber Monday, an increase of 500 percent compared with last year, Mason said in a blog post on Wednesday.

The largest daily-deal company’s shares have been slammed in recent weeks on concern about increased competition. The stock has fallen by nearly half since hitting a high of $31.14 on its Nov. 4 market debut.

Groupon shares rose 6.9 percent to $17.11 in late morning trading on Nasdaq — but were still below the $20 IPO price.

LivingSocial, which is Groupon’s closest rival and is partly owned by Inc, offered more than 20 deals with national merchants during the crucial Black Friday shopping period.

As of Tuesday afternoon, LivingSocial was on course to sell 325,000 to 350,000 national holiday deals.

Companies and executives are restricted from speaking publicly in the first weeks after an IPO, but Mason said on Wednesday that the quiet period was over for Groupon.

The 31-year-old, recently married CEO is scheduled to speak at a Credit Suisse technology conference in Scottsdale, Ariz., later on Wednesday.

“Our IPO process was a wild ride, but we’re excited to get back to business and are focused squarely on the future,” Mason wrote. “We’re back to communicating like a normal company again … well, as normal as we can muster at Groupon.”

Groupon shares sink below $20 IPO price to $17.11

NEW YORK  ― Shares of Groupon Inc. fell for a third day on Wednesday, sinking below the company’s initial public offering price of $20 less than three weeks after the daily deal company went public.

Groupon’s shares fell 14.8 percent to $17.11 on Nasdaq, bringing its decline over the last three days to about 34 percent.

Groupon raised more than $700 million in an IPO in early November, making it the biggest IPO by a U.S. Internet company since Google Inc. raised $1.7 billion in 2004.

Analysts have cited concerns about increased competition. LivingSocial, Groupon’s closest rival, which is part owned by Inc., announced plans on Monday to offer more than 20 deals with national merchants over the crucial Black Friday shopping period.

Daily deal companies often subsidize national deals, making them less profitable than offers run with local merchants. The national deals usually bring in lots of new customers, but put pressure on profit margins.

Groupon plans bigger push this year to get share of holiday spending

CHICAGO ― Groupon Inc. is trying to grab a much larger share of consumers’ holiday spending this year following the biggest daily deal company’s initial public offering.

Groupon launched its first holiday shopping push last year. Grouponicus, as it is known, offered discount deals in 15 cities last year. This year, Grouponicus will target 41 cities in the United States and Canada, including New York, Los Angeles and Dallas.

In 2010, Groupon focused on smaller deals, but this year the company will offer bigger-ticket items.

Groupon plans to offer so-called “Epic Deals” starting Nov 15. These will be specific experiences, such as a round-the-world trip and a cooking class and group dinner with Chef Todd English.

Groupon also plans to offer a national deal with retailer American Apparel Inc, as well as discounts on products like electronics, home goods and fitness products.

“We learned a lot from last year,” said Aaron Cooper, chief of gifting at Groupon.

Groupon’s main business — offering big discounts on local services and products and splitting the revenue with merchants — was criticized as the company traveled a tortured road to being a public company earlier this year.

The company pulled the IPO off, raising at least $700 million in an offering that valued it at around $15 billion. If Groupon has a big holiday season, that could help support its shares in its crucial first few months as a public company.

In another change, Grouponicus holiday offers will show the value of the service on a voucher given as a gift, rather than the price paid.

“Going into the holiday season, Groupon may get used for gift giving which could boost the numbers,” said Fred Moran, an analyst at The Benchmark Co.

Some other, more established e-commerce companies are also offering daily deals this holiday season.

eBay Inc plans 25 days of deals starting Nov 21. The company will offer discounted products on its website and will send one “deal blast” a day to customers via e-mail.

Groupon set to price one of year’s most closely watched IPO

CHICAGO ―  Groupon Inc. is set to price one of the year’s most closely watched initial public offerings late Thursday, to strong demand for the scaled-back stock market debut of the largest daily deal company.

Chief Executive Andrew Mason and his executive team have spent almost two weeks on the road pitching to investors and addressing criticism about a replicable business model, slowing growth and accounting concerns.

The company is poised to price the IPO $1 to $2 above the current $16 to $18 range, responding to surprisingly strong demand for the biggest U.S. IPO in months, three buyside sources told Reuters on Wednesday.

To pull the deal off the company cut its valuation by about half. Existing shareholders aren’t selling and only 4.7 percent of the company is being offered — the second-smallest stake float in the past decade. It also skipped meetings with potential investors in Europe and Asia.

Solid demand for a limited supply of Groupon stock may support the IPO on its Friday debut.

One of the three investors who spoke with Reuters on Wednesday said he had placed an order for 150,000 Groupon shares, but expected to get a much smaller allocation.

Another investor who met Groupon management during the road show said late on Wednesday that he asked to buy stock in the IPO but will not be getting an allocation.

“It seems very tight,” the investor added.

Longer-term, Groupon shares may be volatile on concern about the company’s ability to generate profits and the likelihood that existing investors will sell some of their holdings at some point.

“The post-IPO investor will be taking a risk on this deal,” said Josef Schuster, founder of IPO research and investment house IPOX Schuster.

“It’s maybe a good trade for a day trader, in and out in a single day, but I don’t want to be in it for the long run,” Schuster said. He added that IPOX did not ask for shares in the IPO because it has a multi-year time horizon.

Schuster thinks Groupon is worth $3 billion to $5 billion. If the IPO prices at $19 or $20, the company will be valued at about $12 billion or $13 billion.

A year ago, Groupon turned down a $6 billion offer from Google Inc. Earlier this year, the daily deal company began talking to bankers about an IPO that would have valued it at more than $20 billion.

By October, Groupon was planning to raise about $540 million from the IPO, down from $750 million earlier in the year.

Other Internet companies that went public this year also floated a small amount of their outstanding stock, but the floats were not as small as Groupon’s 4.7 percent.

LinkedIn, a social-networking company focused on professionals, floated 8.3 percent of its shares, while Pandora Media, an online music streaming service, sold 9.2 percent of the company.

LinkedIn surged on the first day of trading in May and the stock remains far above its $45 IPO price.

Pandora shares surged initially, then slumped. Its shares traded below the $16 IPO price on Thursday at just over $15.

Groupon cutting back size of IPO to $500 million, sources report

NEW YORK/SAN FRANCISCO ― The world’s largest daily deals company Groupon Inc. is cutting the size of its initial public offering, three people familiar with the situation said on Wednesday.

Groupon in June filed to raise up to $750 million in its IPO. It now plans to raise less than that amount, though not significantly less, one of the sources said. Another of the sources said Groupon is now planning to raise roughly $500 million.

About 5 percent of the company will be sold in the IPO, a third source familiar with the offering said. The offering will value Chicago-based Groupon at between $10 billion to just over $12 billion, depending on how much the company raises, the source added.

The sources declined to be identified because they’re not authorized to speak publicly about Groupon’s financing plans. Groupon declined to comment.

Groupon’s latest IPO filing said that existing shareholders are no longer planning to sell stock in the offering.

Equity markets have fallen and become significantly more volatile in recent months, putting a damper on all new issues.

Groupon has also been hurt by questions about its accounting metrics, the long-term viability of its business model and the fact that it has lost two chief operating officers this year.

Led by outspoken chief executive Andrew Mason, Groupon is one of the most closely-watched offerings in the U.S. IPO pipeline.

Along with LinkedIn Corp., Zynga, and, next year, Facebook, Groupon offers investors a way to invest directly in social media.

Groupon is expected to launch its IPO roadshow early next week, sources told Reuters on Tuesday.

Groupon may put IPO presentation back on front burner

CHICAGO ― Groupon seeks to go public in October or November, people familiar with the matter told the New York Times on Wednesday, a week after the daily deals website put its IPO on hold for a few weeks as it waited to ride out global market turmoil.

The company, which had postponed a roadshow to attract potential investors early this month, could go ahead with the presentations by mid-October, sources told the Times.

The online coupon giant’s Chief Executive Andrew Mason had earlier lashed out at critics in an internal memo to employees, which became public in August.

The IPO restart is being driven in part by a resolution between the company and the Securities and Exchange Commission over the memo, sources told the newspaper.

Groupon, which is among a clutch of Internet companies heading toward an IPO this year or next, including social games maker Zynga and Facebook, could again delay the stock sale and roadshow in case of another bout of market volatility, people briefed on the matter told the paper.

Groupon was not immediately available for comment.

Groupon cuts marketing costs, hiring costs jump

SAN FRANCISCO ― Groupon Inc’s second-quarter loss more than doubled as it hired more than 1,000 new employees, even though the Internet daily deals company trimmed back its marketing costs.

Revenue rose to $878 million in the second quarter compared with $644.7 million in the first quarter, and rose more than 900 percent from $87.3 million in the second quarter of 2010, the company said in the S-1 filing, an update of its original filing for its initial public offering.

The numbers show that Groupon’s growth slowed from the first quarter. Revenue was up 36 percent in the second quarter, below growth of 63 percent in the first quarter.

The second-quarter net loss attributable to Groupon was $102.7 million, in line with the first quarter and more than double the $36.8 million loss from the second quarter of 2010.

In June, Groupon filed to raise $750 million in an IPO. The move revealed a company growing quickly, but losing money. Some analysts have questioned a business model vulnerable to competition from companies like Google Inc, and which relies on a huge, costly sales staff to enlist merchants and handle customer service.

Some analysts worry that the company will keep having to spend large amounts of money to attract and retain customers.

Marketing costs fell to $170.5 million in the second quarter, according to the filing. Groupon spent $208 million on marketing during the first quarter, up from $4 million in the same period a year earlier.

xThat spending is bringing more users to the site. Subscribers jumped to 115.7 million from 83.1 million at the end of the first quarter, the company said in its filing, confirming a Reuters report last week.

But Groupon said about 40 percent of its subscribers in North America came through word of mouth, a new disclosure. That suggests Groupon did not have to spend as much on marketing to attract subscribers.

Groupon daily deals site public offering to raise up to $750 million

NEW YORK/PALOS VERDES, Calif. ― Daily deals site Groupon Inc. could  raise up to $750 million in its IPO, an offering that has been speculated about for months and that will be watched as a barometer of whether Internet valuations have become too rich.

In April, a source told Reuters that Groupon could raise as much as $1 billion in an IPO that could value it at $15 billion to $20 billion.

Thursday’s filing did not specify the number of shares to be sold in the IPO, the price range, or the exchange, though it did say the shares would trade under the symbol “GRPN.” It also said the $750 million figure is preliminary and may change.

Other Web companies including LinkedIn Corp and China’s Renren Inc. have had strong IPO premieres, and anticipation is building toward a fever pitch for potential offerings by Facebook and Twitter. Pandora, a Web radio company, raised its IPO size to up to $141.6 million on Thursday ― 40 percent more than estimates.

Some doubt whether the buzz surrounding the new Web generation is justified, warning that the hype is reminiscent of the atmosphere prior to the dotcom bust in 2001.

Groupon has also been called into question by critics who say its business ― essentially a coupon service ― can be easily replicated both by startups and existing Web powerhouses. Google has already begun such a service.

Groupon Chief Executive Andrew Mason himself admitted he feared possible competition from businesses that “have some twist on the model we haven’t thought of yet.”

“I think investors will go for this one,” said Ryan Jacob, chairman and chief investment officer of Jacob Funds, which includes the Jacob Internet Fund. “Whether or not it’s worth the valuation it comes at is still an open question.”

Groupon in the filing warned that it has incurred losses ever since its birth 2½  years ago, that its technology may not be up to the task of handling demand, that expenses are bound to rise, and that the market may not continue to grow.

“As with any business in a 30-month-old industry, the path to success will have twists and turns, moments of brilliance and other moments of sheer stupidity,” Mason, 30, said in a letter to potential stockholders that was attached to the filing.