Groupon expects $478.8M in proceeds from IPO

[October 21, 2011]  NEW YORK (AP) -- Online coupon seller Groupon Inc. is discounting its expectations for its first stock offering.

The company, which offers consumers daily discounts targeted toward their city and preferences, now expects net proceeds of about $478.8 million from its initial public offering of 30 million shares. In June, it said it hoped to raise up to $750 million.

Groupon said in a regulatory filing with the Securities & Exchange Commission on Friday that the IPO will be priced between $16 and $18 per share. That implies a valuation for the entire company of $10.1 billion to $11.4 billion. The shares offered in the IPO represent only about 5 percent of the company.

The total net proceeds are based on the midpoint of that price range after deducting offering expenses and underwriting discounts and commissions.

Groupon plans to use the proceeds for working capital and other purposes, including potential acquisitions.

Groupon's IPO, one of the most anticipate offerings of the year, has been beset with questions about how it accounts for revenue and its business model, as well as a weak market for stock offerings.

Early last month a report in The Wall Street Journal said Groupon was reconsidering when to go through with its IPO "on a week by week basis." The source said Groupon had previously expected to price its IPO in the middle of September. Setting expected terms means the offering itself could take place in the next several weeks.

Groupon disclosed in the filing that its revenue has grown from $1.2 million in 2009's second quarter to $430.2 million in the third quarter of this year. The company also said that its subscriber base jumped from 152,203 as of June 30, 2009, to 142.9 million as of Sept. 30.

In a letter addressed to potential shareholders, CEO Andrew Mason said that Groupon spends a lot of money acquiring new subscribers and that it is constantly reinventing itself to keep up with merchant demand. But Mason was blunt that there were potential risks for investors.

"We have yet to reach sustained profitability and we have no shortage of competition. Our path will include some moments of brilliance and others of sheer stupidity. Knowing that this will at times be a bumpy ride, we thank you for considering joining us," Mason wrote.

Groupon said in the filing that after the offering it will have Class A and Class B shares, with Class A stockholders entitled to one vote per share. Class B stock will be allowed 150 votes per share and can be converted at any time to one share of Class A stock. Outstanding Class B shares will represent about 36.3 percent of the voting power of Groupon's outstanding stock following the offering.

Such a share structure is generally intended to give a company's founders more voting power.

The company is giving the underwriters the right to buy up to an additional 4.5 million shares of Class A stock to cover any excess demand.

Groupon expects to list its Class A stock on the Nasdaq under the "GRPN" ticker symbol.

[Associated Press]

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