As we’ve said before, the need for growth companies to be acquired or chase that rubber chicken laced road show circuit to go public through an IPO aren’t private companies only option anymore. While the world can only speculate as to what Groupon will ultimately do, one thing is for sure, they have done wonders in creating shareholder value and increasing their private market value in their very public negotiations with Google.
Perhaps Google was Groupons’ BATNA (best alternative to a negotiated agreement) to the secondary market? Just eight months ago Groupon raised $135 million on a $1.3 billion valuation from DST, which at the time was intended to be used to buyback equity from Groupon’s then 90+ employees as well as their early investors. Today, Groupon reportedly has 1,000 plus employees, and their revenues are north of $2 billion annually. With that kind of trajectory, did Groupon know their downside of walking from Google, or better yet, use Google to pump their valuation up for a new secondary sale of their private company stock, which will provide less dilution, preserve more control and protect their unique culture?
Again, one can only speculate.
The reality is, we just don’t know why Groupon would go public if the private market is providing a higher valuation for their shares and maintains more control for the founders that clearly seem to know what they are doing. We believe that with $2 billion in annual revenue, Groupon is already a “real-live business.” Further, we believe that Groupon can comfortably take its “fuck you money” off the table without having to negotiate further with any public company, Google included. Groupon could sell less shares to the private market than the public market, for less dilution, less scrutiny, less regulation while providing sufficient liquidity to its founders, investors and employees.
So perhaps a congratulations is in order for Groupon.
Jay Gould maintains a long position in shares of Facebook (private). This post was edited by Bill Auslander and originally appeared at SecondShares and is republished here with permission.
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