The company expects to raise $750 million
It’s happened! It’s finally happened! Groupon has officially filed for an IPO. After months of rampant rumors, Groupon is finally taking the plunge and gearing up to go public. Some of the deets are as follows:
Groupon is looking to raise $750 million, but has not said how many shares it intends to sell or what the initial price will be. Some of the shares will be offered by Groupon while others will be offered by existing shareholders.
And now: the long awaited but ever elusive financial data. In 2009, Groupon made $30.4 million in revenue. One year later—ONE YEAR LATER—that number jumped to $713 million. And the company is already on track to skyrocket past that number this year. In the first quarter of 2011, Groupon’s revenues totaled $644.7 million, which will put Groupon well over the $1 billion mark by its second quarter.
But while Groupon was raking in all that revenue, it wasn’t turning a profit. In 2010, the company lost $389.6 million, and in the first quarter of 2011, it lost $102.7 million. Overall, the company had an accumulated deficit of $522.1 million as of March 31, 2011. Additionally, Groupon expects its operating expenses to increase “substantially” in the foreseeable future as it seeks to grow its subscriber base, increase the number and variety of deals it offers each day, expands its marketing channels, expands its operations, ramps up hiring, and develops its technology platform.
In 2010, CEO Andrew Mason’s salary totaled $180,000, though the company notes in its filing that at his own recommendation, Mason’s base salary for 2011 has been reduced to $575 (not in thousands, just…dollars). Meanwhile, former President and COO Rob Solomon (who stepped down earlier this year and was replaced by Margo Georgiadis) and newly hired CFO Jason Child each took home a salary of $350,000. Groupon’s SVP of Engineering and Operations Brian Totty made $250,000 in 2010, and CTO Ken Pelletier made $185,000 for the year.
In May 2010, Groupon acquired European collective buying company CityDeal for $62.9 million, and in August 2010, the company acquired Japanese collective buying power Qpod for $10.2 million. Aside from CityDeal and Qpod, Groupon acquired an undisclosed number of other entities for an aggregate purchase price of $34.8 million, $16.8 million of which was in cash, and $18 million of which was stock.
Groupon plans to use the net proceeds from the IPO for “working capital and other general corporate purposes, which may include the acquisition of other businesses, products or technologies,” though the company notes that it doesn’t have its sights set on acquiring any particular company at the moment.
In its laundry list of risk factors, Groupon lists the possibility that its unprecedented (and indeed, record-breaking) growth might not continue on its current trajectory.
“We expect that the market will evolve in ways which may be difficult to predict,” the company states in its filing. “For example, we anticipate that over time we will reach a point in most markets where we have achieved a market penetration such that investments in new subscriber acquisition are less productive and the continued growth of our gross profit will require more focus on increasing the rate at which our existing subscribers purchase Groupons.”
And then there is the clone issue… Groupon notes that the collective buying/daily deal space is becoming increasingly competitive, as there are “no significant barriers to entry.” As a result, hordes of startups have entered the collective buying fray with business models that are virtually identical to Groupon’s. But the real competition is going to come from the other Internet giants: Facebook, Google, and Microsoft, all of which have launched similar ventures that come in direct competition with Groupon’s business. And unlike the petty commoner clones, Facebook, Google, and Microsoft already command an impressive army of followers.
In a more interesting risk factor note, Groupon admits: “We cannot assure you that we will be able to manage the growth of our organization effectively.” In other words, Groupon’s record-breaking growth has been so fast that it has placed significant stress on the management team and resources. Furthermore, there are virtually no other historical models for Groupon’s growth—so Groupon is essentially blazing a new trail in the management of hyper-hyper-growth. Not to mention the basic reality of technical malfunctions. Groupon’s growth has been so rapid that its internal controls and procedures may not, quite frankly, be able to keep up.
While the company stopped releasing info on its employees and metrics, Groupon said in its prospectus that it now has over 7,000 employees and 83 million subscribers across 43 countries. By comparison, in December (around the time Groupon snubbed Google’s silly $6 billion buyout offer), Groupon had 3,000 employees and 20 million subscribers.