Groupon is considering a delay to its long-awaited initial public offering amid turmoil in the stock market.
While the online coupon giant had been hoping to go public by the end of this month, it is studying the market conditions and may push back the timing of the offering, said two people briefed on the matter who were not authorised to speak publicly about internal discussions.
Earlier this summer, Groupon was aiming for an initial public offering (IPO) at a valuation near $30 billion and had been considering a roadshow for potential investors next week. The roadshow now appears to be off the table.
The hesitation by Groupon underscores how the continued volatility in the market is rattling even those with the most reason to be confident. Groupon is one of the most anticipated offerings of the year, and offerings of social media companies, like that of LinkedIn, had appeared to be immune to the vicissitudes of the broader market. What Groupon ultimately decides to do could affect the plans of other technology darlings, like Zynga, the online gaming giant; LivingSocial, a big competitor to Groupon; and the biggest of them all, Facebook.
Groupon, however, is also wrestling with other potential issues. The company has been in discussions with the Securities and Exchange Commission over its IPO prospectus. A recent memo from the company’s chief executive, Andrew Mason, may complicate that process.
The memo to employees promoted the company’s growth and strength against rivals. But the memo quickly found its way in the public sphere, raising concerns about whether the company had violated the mandatory “quiet period” that applies to companies waiting to go public.
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One possible outcome is that Groupon will need to again amend its IPO filing to include the memo from Mason and provide additional data to back up his assertions.
Behind the SEC’s rule is an effort to clamp down on possible stock promoting. All relevant financial information about a business is meant to be included in a company’s prospectus.
Groupon would not be the first company to run afoul of quiet-period rules. Google’s co-founders, Larry Page and Sergei Brin, notoriously gave an interview to Playboy magazine conducted shortly before the search giant filed for its IPO. The company did not delay its offering, but was forced to amend its prospectus to include the interview.
This would not be the first time Mason’s team has tangled with regulators either. In August, the daily deal site dropped a controversial accounting metric, called “adjusted consolidated segment operating income,” or ACSOI, after pushback from the Securities and Exchange Commission.
Representatives for Groupon and the SEC declined to comment.
Started less than three years ago, Groupon has emerged as one of the fastest rising start-ups in the technology sector. The company’s valuation has soared in the past year, turbo-charged by increasing sales and early takeover interest from technology giants, like Google and Yahoo. It recorded $878 million in net revenue for the second quarter — a 36 per cent increase from the previous quarter.
But the site, the largest of its kind, has drawn sharp criticism from retailers and analysts who question its ability to reduce its marketing expenses and sustain its growth rate. It has also confronted some setbacks abroad, most notably in China, where it is facing stiff competition from a swarm of domestic players. In the internal memo, Mason argued that the company had been outstripping its rivals, including services from Google and Amazon. Facebook recently folded its own offering. News of Groupon’s deliberations was reported earlier by The Wall Street Journal online.
©2011 The New York
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