If enough people buy into Groupon’s IPO, it seems, they all may get a discount. Of course, this isn’t the goal of the daily deal site, but it could be an unintended consequence. Half a year ago, according to InvestorPlace, the company was looking at a valuation of around $25 bn. The summer has been tough on Andrew Mason‘s business, however, and the press has been merciless. The latest guess is an IPO valuation as low as $3 bn.
That’s an 88 per cent discount, and it would have Groupon’s users dancing in the streets.
It’s a tough spot. Back in December, Google offered to buy Groupon for the now princely sum of $6 bn, but I doubt that offer is back on the table.
Groupon faces a number of problems – and they are more significant than Mason’s not being able to adhere to the quiet period. Merchants aren’t happy with the results they are getting from Groupon promotions, particularly because customers aren’t coming back following a deep-discount promotion.
As to its valuation, restated financials are also a contributing factor, and the once big number fell by half. To make matters worse, the company is still in the red.
Simply put: Groupon tried to go to market too soon. If the founders had passed on taking money of the table and invested it in their business, they may have had a better shot. At least it would have bought them time to look at structural weaknesses in the business, resolve them and have a stronger company going forward. The cat’s out of the bag, now, however. And Groupon needs to figure out how to get in front of the investing public effectively.