Based on claims that its subscriber base has doubled over the past three months and a push into 100’s of new cities there are rumblings that Groupon’s eventual IPO could peg the service at a $25 billion valuation.
Groupon Inc. has held talks with banks about an initial public offering that would value the online-coupon company at as much as $25 billion, according to two people with knowledge of the discussions.
The two-year-old startup’s IPO may happen this year and is unlikely to assign Groupon a valuation of less than $15 billion, according to the people, Bloomberg Businessweek reports in its March 21 edition. They asked not to be identified because the talks were private.
It’s about right here that most of the world will insert the “but the model can be replicated etc etc”. I’ve done that in the past. What’s either going on here is that Groupon is even bigger than most of us can grasp or this is simply the most incredible spin job in the history of business.
Let’s look at the ‘facts’
- The company is only about two years old
- It’s in a new space
- Groupon’s competitor’s have attracted investment dollars including Amazon’s bet on rival LivingSocial. Even the New York Times wants in.
- They are a slick PR bunch
- Groupon has an aggressive (if not over zealous) sales force
- There appears to be some of the turn of century emotional talk that ended in a bad way
- Groupon commits serious gaffes and yet seems to be bulletproof
Honestly, I don’t get it. But that doesn’t matter because if big banks want to throw money at them who am I to say that it’s wrong. They’re big boys. Heck, they handled the mortgage situation so well so shouldn’t we trust their judgment in this as well? .
The one trump card that Groupon may have in this game is their first to market position. In fact, it’s their spin that has been building that image even more (how based in reality that is, who the heck knows).
The daily deals business “is hot as anything, and no one knows where it’s going to tap out,” saidAlex DeGroote, a media and technology analyst at Panmure Gordon in London. “The experience of Internet companies shows that margins and profitability tend to accrue very substantially to the market leader,” giving a dominant player like Groupon a heavy advantage, he said.
So let the sharks circle because there may be blood in the water just like the good old days. How this plays out will be interesting since there will be winners from the big banks who had the ‘first in line’ privilege, will take IPO profits and run. Then there is the rest of the investment crowd who can’t resist a hyped up gamble. Will they be left with soap all over them if this bubble bursts or will they be rolling in the dough even though it won’t be discounted like everything else related to Groupon?
What’s your take?