Groupon IPO on Hold as SEC Questions Pile Up
September 7, 2011 (TB) Questions about Groupon Inc.'s planned initial public offering are continuing to pile up, with a new report saying that the Chicago-based daily deals company is delaying its debut amid market volatility.
The Wall Street Journal reported Tuesday that Groupon is rethinking the timing of its IPO and cancelled a series of presentations to potential investors that was planned for next week. The roadshow, as those meetings are called, is typically the final phase before pricing an IPO and the start of trading.
Groupon filed with the U.S. Securities and Exchange Commission to go public in June, seeking to raise up to $750 million. Although the company had never publicly stated a timeline and the SEC's review process can take three to six months from the time of filing, Groupon had been expected to go public sometime in September.
Groupon declined to comment Tuesday. An SEC spokeswoman also declined to comment on the report, which said the agency had contacted a Groupon attorney about an internal memo by Chief Executive Andrew Mason that was leaked to the press last month.
Many companies have seen recent market gyrations throw off their IPO plans. Chicago-based data security firm Trustwave, for example, was scheduled to go public in August but postponed the debut, citing market conditions.
Market turmoil bodes poorly for IPOs because newly public companies, which do not have financial and share performance histories, are seen as especially risky investments. The current tumult has blocked up what is usually a seasonal pick-up in IPOs after the slow month of August.
Activity "normally picks up in the mid- to late part of (September), but given the market volatility and overall weakness, I think the IPO calendar has been pushed out to October-November," said Jim Krapfel, an equity analyst at Morningstar. "Companies are waiting it out on a week-by-week basis for the market to recover."
Groupon is battling more than broader market headwinds on its way to becoming a public company. In July, it filed amended documents with the SEC asking investors to ignore a reported statement by co-founder Eric Lefkofsky that the company would be "wildly profitable."
Groupon's business model is also under scrutiny from skeptics in the financial press who say the company isn't sustaining the same pace of revenue growth it showed last year. Mason addressed these criticisms in the memo, whose public disclosure then fueled speculation the company had deliberately leaked the document to skirt the SEC's "quiet period" rules.
Krapfel said the controversy over the memo was more of a sideshow than an "indicator of the ultimate worth of the company." He added that Groupon's valuation will hinge on "the evolving competitive environment, the company's financials, how the revenues continue to grow and whether profitability is in sight."
Share this article: >